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www.opgpower.com
India:
OPG Power Ventures Plc
No. 6, Sardar Patel Road
Guindy
Chennai – 600 032
India
T: +91 44 42911234, 228
Isle of Man:
OPG Power Ventures Plc
IOMA House, Hope Street
Douglas, Isle of Man
IM1 1AP
T: +44 (0) 1624 681200
Delivery and growth
OPG Power Ventures Plc
Annual Report and Accounts 2012
OPG Power Ventures Plc is
developing and operating
power plants in India.
The Company is committed to
building shareholder value and to
being the first choice provider of
reliable, uninterrupted power at
competitive rates to its customers.
OPG is listed on the Alternative
Investment Market of the London
Stock Exchange (AIM:OPG).
Overview
01 Highlights
02 Our Operations and Projects
04 Market Overview
06 Business Model
08 Key Performance Indicators
10 Chairman’s Statement
Business Review
12 Chief Executive’s Statement
16 Maximising Opportunity
18 Continuous Supply
20 Strategic Locations
22 Operational Review
24 Principal Risks
26 Financial Review
30 Responsible Growth
34 Board of Directors
Corporate Governance
36 Corporate Governance
40 Directors’ Remuneration Report
44
46
Directors’ Report
Statement of Directors’ Responsibilities in Respect of the Accounts
Financial Statements
Independent Auditors’ Report to the Members of OPG Power Ventures Plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
47
48
49
50
52
53
78 Corporate Directory
79 Definitions and Glossary
01
Operational
Highlights 2012
> 77 MW Chennai I operated at a plant load factor of 92%
> 77 MW Chennai II construction complete and trials
ongoing; revenue generation expected by September 2012
> Accelerated construction of new 80 MW Chennai IV;
expected commissioning Q2 2013
> 160 MW Chennai III construction commenced; expected
commissioning Q2 2014
> 300 MW Gujarat facility based on air-cooled condenser
with H2 2014 commissioning
> No coal shortages experienced by OPG
Revenue £m
EBITDA £m
45.25
33.15
15.54
12.57
6.95
11.52
2010
2011
2012
2010
2011
2012
Pre-exceptional earnings
per share pence
2.129
1.705
Average tariff realisation Rs/KWh
5.55
4.95
4.93
0.32
2010
2011
2012
2010
2011
2012
Financial
> Group revenue up by 37% to £45.25m (FY11: £33.15m)
> EBITDA at £12.57m (FY11: £15.54m)
> Exceptional change on deconsolidation of legacy plants £4.82m
> Earnings per share (pre-exceptional) 1.705 pence
> Cash and cash equivalents of £39.27m (including
available-for-sale investments amounting to £1.39m)
> Long-term borrowings of £56.05m
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 02
Our Operations and Projects
113 MW current operating capacity
Current
77 MW
36 MW
25.4 MW Mayavaram
This natural gas based plant is near Mayavaram in
Tamil Nadu and from 1 December 2011 is held as an
investment. Gas is supplied from the adjacent Cauvery
Basin fields under a long-term supply agreement with
Gas Authority of India Ltd. The success of this pilot plant
has validated the effectiveness of the Group Captive
power plant model. The plant supplies power to industrial
customers and part of the output of this plant is being sold
in short-term markets. The plant is 44% owned by
the Group.
10 MW Waste Heat
The 10 MW waste heat recovery plant is located at
Gummidipoondi, about 55 kilometers from Chennai.
From 1 December 2011 it is held as an investment. The
plant uses waste heat from the contiguous sponge iron
facility of an associate, Kanishk Steel, and a blend of coal
and dolochar which is a process residue in sponge iron
production with residual calorific value. Owned 33% by
the Group, the plant sells part of its output in short-
term markets.
77 MW Chennai I
Chennai I, a thermal coal plant, our flagship asset, is
located at Gummidipoondi about 55 kilometers from
Chennai. The site is well located to serve industrial
customers and is close to the ports of Ennore and
Chennai. The plant is 99% owned by the Group and
has domestic coal linkage from Coal India Limited
(CIL) against which it has been receiving 50% of its
requirements, as committed by CIL, and the balance
requirement is being imported.
The plant achieved an average PLF of 92% in 2011-12
and plant availability of 95%. From January 2012 the
O&M is managed in-house (previously outsourced) and
has achieved better performance in all key areas. The
plant has established HR practices including capability
development initiatives and employee involvement in
knowledge sharing and training programmes, setting a
standard for the Group.
Projected capacity growth profile MW
1,000
800
600
400
200
0
Calendar year
2009
2010
2011
2012
2013
2014
Existing capacity
Addition
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 03
Development
629 MW under development
317 MW
312 MW
5
1
0
2
77 MW Chennai II
Chennai II plant is a brownfield expansion project and a
replica of Chennai I. Construction of the plant is complete.
The trials and commissioning phase commenced from
June 2012. Similar to Chennai I the plant has domestic
coal linkage from CIL against which it is expected to
receive 50% of its requirements, as committed by CIL.
The balance requirement is expected to be imported.
Owned 99% by the Group, commercial operation of this
plant is expected to commence from September 2012.
160 MW Chennai III
Originally configured as 2 x 80 MW unit, the plant has
now been reconfigured to a single 160 MW unit which
is expected to provide 10% fuel consumption savings
and a lower turbine/boiler heat rate. In addition the
reconfiguration allowed adequate space for another
80 MW plant. The plant located on the same site as
Chennai I and II, has environmental approvals, debt and
equity funding in place. Equipment orders are under way
and the Company has issued a Letter of Intent for boiler,
turbine and generator. Balance of Plant (BOP) deliveries
are under way and construction has commenced.
The project, owned 99% by the Group, is expected to
commission in 2014.
300 MW Gujarat
For these 2 x 150 MW modular plants, land, debt and
equity are in place, environmental clearances have been
received, boiler component delivery has commenced
and EPC for BOP has been awarded. An air-cooled
cooling process has been adopted as opposed to water
cooling. Construction activity has commenced at site,
boiler and chimney foundations are complete and 50%
of the power house building has been completed.
The project has 70% domestic coal linkage from CIL.
Commercial operation is expected to commence in
H2 2014.
12 MW Bellary
Located on a 120 acre brownfield site in the industrial
heartland of Karnataka state, this project is expected to
complete in 2014 and has the potential to develop into a
350 MW plant in the future.
MoU with Gujarat State Government
MoU signed with Gujarat State to develop 5,400 MW of
generating capacity by 2018, with 4,000 MW thermal
coal and 1,400 MW gas plants. The Government of
Gujarat is to facilitate approvals. Initial progress relating to
fuel transhipment facilities is being made.
80 MW Chennai IV
The project is an additional 80 MW brownfield expansion
at the Chennai site. Equity funding for the project is from
internal accruals and debt is under finalisation.
Equipment delivery has commenced with c. 55% of
materials received and construction work at the site is
under way. 80% of the civil work, power house building
and the chimney are complete. Boiler and coal handling
plant erection are in progress. Approximately 65% of coal
supply is expected to be through imported coal and for
domestic supply coal linkage has been established with
CIL. Commissioning is expected in Q2, 2013.
Routes to market
Group Captive
> Bilateral arrangements
Merchant
> Sales with traders
with consumers/
traders/utilities
> Offering reliable,
consistent power
supply, even during
peak periods
> Attractive prices
relative to alternative
tariffs
directly
> Flexibility and risks
of spot pricing
> Returns dependent
on available pricing
> Limited to one day
future trading
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 04
Market Overview
OPG’s growth prospects are firmly underpinned by the economic
fundamentals for power demand in India. The Indian power industry in
2011–12 experienced pressures on several fronts some of which now
seem to be easing. Nonetheless, with a persistent shortfall in new
capacity additions, exacerbated power deficits, ranging from 9–13%
and demand forecasts exceeding 300 GW by 2017, we believe the
opportunity for supply of reliable power will prevail.
Macro situation in India showing signs of recovery
With the Government showing signs of favourable
intervention fundamental changes have been stimulated,
redefining a steady growth path to harness the
industry’s potential.
> Indian GDP registered an increase of 6.5% in FY12
and similar growth is expected in the current year
> Total 55 GW capacity installed during 11th Five Year
Plan (2007–2012) and target of c. 90 GW by 2017
Domestic coal pressure
> Delays in development of new mines, on account of
environmental approvals, may impact supply to new
power plants and projects relying on captive coal
blocks
> New domestic coal capacity being made available
by expediting new mine build-out
> Coal India asked to increase fuel supply to 80% of
linkage commitments in case of Independent Power
Producers (as against 50% currently)
> Demand for power expected to grow at approximately
> Increased reliance on imported coal leading to higher
10% per annum until 2020
prices and impact on profitability
> After a marked increase in FY11, global thermal coal
> Thermal coal exempted from 5% import duty to
prices softened by over 15% during the year
> Following an escalation of 375 bps over 13
consecutive rises in interest rates to combat rising
inflation, the Reserve Bank of India reduced interest
rates by 50 bps
> Amended rules on External Commercial Borrowings
may provide an improved opportunity
Tariff reforms offer respite
> Poor financial health of the State Electricity Boards
(‘SEB’) principally on account of low tariffs for years
leading to regulator intervention
> In FY12, 16 SEBs increased average tariffs
up to 35%
> Tamil Nadu announced a notable hike of over 35%
in power tariffs in FY13
> During the year, the Central Electricity Regulatory
Commission indicated an upward movement in
Merchant power tariff
> Fuel price adjustment mechanism being introduced
ease supply pressures
> South Africa, Australia and newer destinations like
Mozambique and Columbia being considered,
besides Indonesia – the key source for India’s present
coal imports
Business Opportunity
> OPG is one of the pioneers of the Group Captive
model, supplying to a broad base of industrial and
commercial customers
> The model provides flexibility to sell power either to
Group Captive or Merchant consumers
> Improvement in profitability of SEBs, steered
by tariff hikes, expected to improve Group Captive
and Merchant power demand and tariffs
> Growing opportunity in Group Captive and
Merchant power sectors as industrial and
commercial consumers face power cuts and
industries being subject to power holidays.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements Dashboard
Capacity growth profile MW (’000)
Peak deficit MW (’000)
50
40
30
20
10
0
05
–10.6%
–9.8%
–16.6%
–13.3%
–12.2%
–11.2% –11.7% –12.3%–13.8%
–11.9%
140
120
100
80
60
40
20
0
VIIIth plan IXth plan Xth plan FY08
FY09
FY10
FY11
FY12
FY03
FY04
FY05
FY06 FY07 FY08
FY09 FY10 FY11 FY12
Target Achieved
Source: CEA, Ministry of Power
Demand Met % defict
Source: CEA, Ministry of Power
Annual capacity addition has been much less than the
planned targets for the sector resulting in power deficits
Power deficit continues to range between 9% and 13%,
while at the same time increasing in absolute terms
Coal requirement & domestic availability for power
sector million tonnes
Tamil Nadu: Average cost of supply & average rate of
realisation Rs/KWh
900
800
700
600
500
400
300
200
100
0
550
402
336
265
215
210
End of 8th plan
263
End of 9th plan End of 10th plan End of 11th plan End of 12th plan
455
842
359
Coal requirement (MT) Coal availability (MT)
* Provisional figures. Source: CEA, Ministry of Power
–1.73
–1.98
–2.12
–2.39
–0.69
–0.45
–0.81
7
6
5
4
3
2
1
0
FY07
FY08
FY09
FY10
FY12
FY11
FY12
FY13
Average cost of supply Average rate of realisation Loss per unit
Source: Tamil Nadu Generation and Distribution Corporation
Over 32 thermal power stations remained critical with
coal stocks for less than seven days on the last day of
March 2012
Tamil Nadu announced a notable hike of over 35% in
power tariffs in FY13
Domestic and imported coal usage for power
generation million tonnes
Tamil Nadu HT category-wise billing rate1 from
April 2012 Rs/KWh
450
360
270
180
90
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Domestic coal Imported coal
Source: Ministry of Coal, CRISIL Analysis
Over the past decade, power sector usage of domestic
coal grew by 6% p.a. in volume compared to 24% p.a.
for imports
■ HT III – Commercial establishments
■ HT IIB – Private educational
institutions etc.
■ HT IA – Industrial establishments
■ HT IB – Railway traction
■ HT IIA – Government
institutions2
7.41
7.09
6.38
6.36
5.58
1 Excluding fuel price surcharge
2 Includes Government and Goverment aided institutions
Source: Tamil Nadu Generation and Distribution Corporation
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
06
Business Model
The Company aims to build shareholder value by being
the first choice provider of reliable and uninterrupted
power at competitive rates to its customers. Our strategy
is to maximise the performance of existing generation
assets and to continually de-risk our project portfolio.
ompetitive pricin g
C
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Demand
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Superior
returns
Brownf eld and modular e
R esponsible gro
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a
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Continuous,
uninterrupted
power supply
Group Captive
model
Team
orts
y t o p
P r o x i m i t
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
07
Our business model is driven by the shortage of reliable and continuous power in highly
industrialised states of India.
Continuous, uninterrupted power supply
OPG’s revenue model is to sell in the short-term market to industrial and commercial
customers or state utilities. OPG, a source of continuous and uninterrupted power supply,
provides an opportunity to meet the regular and peak power demands to its customers.
£
Competitive pricing
> Power is sold to industrial and commercial customers at an attractive price versus
state utility tariff
Brownfield and modular expansion
> Expansion of capacity is executed by building modular sizes and choosing technology
and equipment which reduces operational risks
> New projects and plants built on existing sites
Coal flexibility
> The boilers at our plants have been uniquely designed to burn coal sourced either
domestically (India) or imported (Indonesia) and can be burnt singly or in any mix of the
two. Coal with high moisture tends to be cheaper than that with less moisture
Proximity to ports
> Our principal plants and projects are located close to ports which allows us to obtain
the domestic or imported coal with minimum land logistics.
Our business reflects our core values and us striving for excellence in management.
Responsible growth
> Seek to identify and maximise any brownfield development opportunities
> Evaluate and work with long-term, top tier financing, technical and consulting partners
> Ensure all environmental norms are met or exceeded
> Take cognisance of the needs of local communities
Team
> Promote a safe working environment
> Continually enhance our development skills through internal mobility of senior
employees with project development experience
> Evolve reward structures to align with value creation
Superior returns
> Secure best available tariff through flexibility of supplying power under the Group Captive model
> Maintain ability to use domestic, imported and blended fuel sources of a broad range of specifications
> Implement optimisation of generation assets and work with development partners to incorporate performance
improvement measures in subsequent projects
> Minimise exposure to complex logistics
ompetitive pricin g
C
C
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f
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i
bility
orts
y t o p
P r o x i m i t
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
08
Key Performance Indicators
The Company aims to build shareholder value by being
the first choice provider of reliable and uninterrupted power
at competitive rates to its customers. Our strategy is to
maximise the performance of existing generation assets
and to continually de-risk our project portfolio.
Average tariff realisation Rs/KWh
5.55
4.95
4.93
This is the average price realised per unit
of power sold. Revenue for the Company
is calculated by multiplying the number of
units sold by the average price realised.
The average tariff achieved for FY12 was
Rs 4.93/KWh, amongst the highest in
the sector.
EBITDA £m
2010
2011
2012
15.54
12.57
6.95
2010
2011
2012
Earnings Before Interest, Taxes, Depreciation
and Amortisation is a factor of volumes,
prices and cost of production. This measure
is calculated by adjusting non-operational
and exceptional items, depreciation
and net finance cost. It is a measure of the
Company’s operating profitability. EBITDA
for FY12 was £12.5m.
Pre-exceptional earnings per share pence
2.129
This represents net profit after tax
attributable to equity shareholders. EPS
growth also demonstrates the management
of our capital structure. In FY12, earnings
per share was 1.705 pence.
1.705
0.32
2010
2011
2012
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 09
Chenai I cost of generation* – Rs/KWh
3.10
3.25
The cost of fuel is the primary cost input
in power plants. 77 MW Chennai I cost
per KWh increased marginally to Rs 3.25
(FY11: Rs 3.10) due to an increase in INR coal
costs.
*Excludes electricity tax
2011
2012
Gearing
10%
–24%
19%
Gearing is a measure of net debt to
shareholders equity plus net debt.
The Group has net debt of £31.59m
(2011: net cash £29.64m) and gearing
of 19% (2011: negative gearing of 24%).
As development of projects proceeds,
the gearing turns positive.
2010
2011
2012
Plant load factor – Chennai I
Plant load factor measures the output of a
power plant compared to the maximum
output it could produce. A higher load factor
represents a more efficient plant and means
fixed costs are spread over more KWh of
output resulting in a lower price per unit of
electricity. Operationally, all plants performed
well with average PLF of the 77 MW Chennai
I plant at 92%.
92%
75%
2011
2012
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 10
Chairman’s Statement
“ The emphasis on accelerated development and delivery
continues, both at Chennai and Gujarat, with this largely
brownfield expansion portfolio being increasingly de-risked.
In the light of what we see as structural and beneficial,
changes taking place with regard to power sector pricing in
the country, we are confident that the Group’s differentiated
and profitable business model will increasingly contribute to
build superior shareholder value.”
Building on our track record
We benefited during the year from a strong, full year contribution from
the Chennai I (77 MW) plant as we forged ahead with our projects
under construction.
View of Chennai I (right) and Chennai II (left)
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 11
The year also saw progress at the 300 MW Gujarat
project although the project has faced some local
objections. I referred in my report last year to the
constant testing of approval processes in a democratic
country – environmental clearances for the Gujarat
project were confirmed by the National Green Tribunal
but nevertheless the Company has elected to go the
extra mile by adopting air-cooled condensers. We believe
this eliminates the basis for any of the claims that have
been made against the project on environmental
considerations.
OPG hopes to benefit from shortage in supply of reliable
power in India. The 11th Five Year Plan has now ended
and around two thirds of the anticipated capacity during
that period was actually delivered. The demand outlook
for power in India has its foundation in the Government’s
desired economic growth for the country of
approximately 10% p.a. The year witnessed high interest
rates and a weak currency against the US Dollar leading
to bottlenecks in infrastructure financing and
development, particularly for large projects, the sort that
an emerging country such as India acutely needs to
support anything close to its targeted growth level.
Whilst your Company has maintained its hallmark fuel
flexibility it is encouraging to see the Indian Government
responding to the country’s shortage of domestic
coal supplies. Our hope is that this focus will persist.
Furthermore, there has been a centralised push to
address the ailing health of some of the State Electricity
Boards as part of reform of the sector. Tamil Nadu should
be a beneficiary of this with tariff rises of over 35% and
fuel surcharge introduced – we expect to see some
benefit of this flow through to the Company. These
events and trends suggest an improving marketplace
for us to operate in compared with the poor conditions
last year.
I would like to conclude by thanking the management
and its dedicated team for their commitment during a
difficult year. Progressing all projects and being profitable
in this environment is no mean achievement. With our
team’s continuing enthusiasm, I remain confident of the
Company’s bright future.
M C Gupta
30 June 2012
I am pleased to report that in one of the most difficult
trading environments the Indian power sector has
witnessed since private sector participation began nearly
20 years ago, the Company has made considerable
progress in advancing its projects and operations.
We achieved revenue of £45.3m compared with £33.1m
in 2010–11 whilst pre-exceptional earnings per share was
1.705 pence. Our business model continues to achieve
average tariffs ahead of our competition. This has
delivered margins that are amongst the highest amongst
independent Indian electricity generators.
There has been much talk of coal availability and the
impact that a shortage could have on the operation and
development of large, new plants. Our plants are smaller
in scale and are designed to be flexible and profitable
under a variety of operating conditions and using various
quality fuels. Coal availability was not a problem for OPG
as linkage commitments were met and other quantities
were imported at comparable cost. We expect this to
continue to be a distinguishing feature of our business in
the long-term.
All our projects have progressed during the year.
Specifically, we accelerated Chennai II which is to be
commissioned shortly and announced the addition of
another 80 MW unit, Chennai IV, which is also currently
ahead of schedule. Our ability to fund internally the
equity of this latest project reflects our focus on returns
and cash generation. In due course we shall have
approximately 400 MW of capacity at the Chennai site.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 12
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Chief Executive’s Statement
We are confident that OPG remains on track to achieve
its target of over 700 MW of capacity. Our focus
remains on maximising the performance of our assets
and de-risking our projects.
Strong operational performance
Returns on our flagship asset prove the business model.
View of the Chennai site showing Chennai I and ongoing construction
OPG Power Ventures Plc
Annual Report and Accounts 2012
13
Overview
Business Review
Corporate Governance
Financial Statements
between Rs 5.30 and Rs 5.70/KWh from July 2012
onwards. Had the Company’s model been to sell power
on a typical long-term Power Purchase Agreement it
would not have been in line to benefit from these much
needed changes in the tariff structure.
Gross margins remained healthy at 33% and the
fuel-flexibility of Chennai I in particular enabled us to
maintain our load factors and gross margins in the wake
of increased average international coal prices. The sharp
appreciation of the US Dollar against the Indian Rupee
exacerbated the effect of rising coal prices further in
Rupee terms. Notably, capital equipment purchases
are principally denominated in Indian Rupees and
accordingly projects remained within budget although
interest costs were higher than expected due to several
increases in rates during the year. The translation and
presentation of our results is also adversely affected by
the circa 10% depreciation of the Rupee against Sterling
during the year.
A fuller analysis of operating and profit performance,
highlighting the strong contributions from Chennai I,
is provided in the financial review.
Accelerated growth
At the time of writing, the 77 MW Chennai-II project,
an accelerated replica of Chennai I, which has been
connected to the infrastructure that it shares with its
operational twin unit, is undergoing full scale early
commissioning. In the space of a few weeks OPG
should be a 190 MW generating company, compared
to 20 MW at IPO just over four years ago.
We announced during the year that our use of the
Company’s Chennai site has been expanded by the
combination of two 80 MW projects (now 160 MW
Chennai III) making way for the development of a new
80 MW project on the same site (Chennai IV). Despite
being a young company the profitability of our business
model has enabled us to fund the equity for Chennai IV
from internal cash flows and not revert to shareholders,
thereby accelerating potential returns on capital.
The year ended 31 March 2012 has been characterised
by strong operational performance of the Company’s
flagship asset and rapid de-risking of projects despite a
challenging trading environment which is now beginning
to show signs of recovery. I am pleased to provide a
summary of our results and major operational events
during the year as well as a discussion of our trading
environment. Our focus remains on maximising the
performance of our assets and de-risking our projects.
Returns on our flagship asset prove the
business model
Revenue was up 37% to £45.25m and income from
continuing operations before period expenses on
projects, exceptional and non-cash items and tax was
£9.6m. These figures reflect a reduced contribution
during the period from the 26 MW and 10 MW legacy
plants notwithstanding a strong showing from the
Chennai I – 77 MW, in its first full year of operations, with
revenues up 78%, a gross profit contribution of £12.56m
and gross margin of 33%, similar to last year at 36%.
Chennai I, for which we raised equity as part of our IPO
in May 2008, has consistently delivered a load factor of
92% throughout the year. The pre-tax return on equity
of this project during 2012 was just under 50%, making
it one of the most profitable generation units in India.
Our balance sheet has net debt of £31.59m at the year
end representing a gearing of 19%.
Increased revenues compared with the prior year
reflected the operation of Chennai I for the whole of the
year. In addition, OPG demonstrated that its flexible
Group captive model secures optimum market prices
for the Company’s power. Average tariffs achieved of
Rs 4.93/KWh were similar to the prior year Rs 4.95/KWh
and at the time of writing, following the regulated tariff
changes announced in April 2012, the Tamil Nadu
Electricity Board has filed an application with the state
regulator which would enable them to purchase a large
proportion of generation from our Chennai I and II at
Construction has progressed at our 300 MW Gujarat
project site with boiler foundations nearly complete
and progressive deliveries of equipment on site having
commenced. Although the Company had obtained
the necessary environmental approvals, these were
challenged before the National Green Tribunal which
upheld the clearances given. Notwithstanding this,
the Company has now decided to further exceed
requirements by adopting an air-cooled cooling process
as opposed to water cooling. Accordingly neither the
pipeline nor the inlet that had been the primary basis of
14
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Chief Executive’s
Statement
continued
the failed challenges will remain as part of the project
development plan. Our legal advisers confirm that all
approvals for moving to air-cooled cooling are in place and
whilst our EPC contractors advise that commissioning is
more likely to be by H2 2014 we are pleased to report that
the project budget is not being modified.
Minority owned plants
It has been decided, on a comprehensive consideration
of the matter, to deconsolidate from Group accounts,
effective 1 December 2011, the results of the two minority
owned, legacy plants (the 26 MW Mayavaram unit and
the 10 MW Waste Heat unit). As we outlined at the time
we released our interim results in December 2011, the
performance and contributions from these minority
owned plants is negligible and, in reaching this decision,
we also took into account their business and earnings
outlook, the increasingly marginal contributions from
these assets in the light of the scaling up of the majority
owned assets and, especially, the management time
required to be invested in the running of these units.
Accordingly, a fair valuation of these assets as at
30 November 2011 by independent valuers, as required
by the accounting standards, was undertaken and the
resulting non-cash, non-operating adjustment of £4.82m
to their carrying value as at that date, applicable to the
Company, charged to period revenue. The declared
results reflect this charge after taking into account the
earnings from these units for the first eight months of
the year.
Henceforth, the Group’s interests in these units will be
treated as investments at the adjusted carrying value of
£1.38m. This compares with the original outlay by the
Group of a modest £0.05m in these plants.
the coast means we do not suffer inland transportation
costs to the same degree as inland producers.
While international coal prices have softened in recent
weeks we expect prices to trend upwards in the medium-
term as coal supplies and demand fall more into line.
Macro case remains intact and the tariff
environment is showing signs of improvement
Indian GDP registered an increase of 6.5% for the year to
March 2012. Whilst less than the 7.5 to 8% growth rates
of the previous two years, this is still an appreciable
performance given the European debt issues and other
problems of the world economy. The lower growth
figures may be attributed in part to a tighter monetary
and exchange policy stance with consequent increases
in interest and exchange rates. There are indications that
this policy is being relaxed and GDP growth expectations
for the current year are 6.5%.
The 11th Five Year Plan period closed on 31 March 2012
with increase in power capacity of 55 GW, a near 70%
achievement compared with the target of 78 GW. The
persistent shortfall in new capacity additions has only
exacerbated the prevailing power deficits, with peak
deficits above 12%.
Against this need to rebalance demand and supply,
state utilities, constituting the country’s dominant power
producers and distributors, have held their price lines for
the sale of power virtually static in the last several years
notwithstanding fuel availability and cost pressures that
became especially acute last year. This affected margins
for all private power producers and tempered the
incentive to make large scale fresh investments in the
sector.
No problems with coal supply
OPG received all committed supplies of coal under Indian
linkages supplemented by imported coal from Asia,
largely under contract.
OPG’s plants are engineered to work with either higher
ash Indian coal or high moisture Indonesian coal or a
blend of the two. Such design specification provides
OPG with flexibility at times of either shortage in Indian
coal supplies or increased prices of imported coal. Most
other Indian power producers are reliant on obtaining
coal either from the development of coal blocks allotted
to them, which are currently substantially delayed, or
entirely on imported coal. Moreover Chennai I uses a
lower energy coal for which demand is typically not as
high, and therefore prices not as elastic, as some of the
higher quality Indonesian or Australian coals, thus enabling
us to support our margins. Being located in proximity to
There is now increased recognition on the part of the
regulators and the utilities of the need to charge realistic
prices for electricity. This recognition has already
translated into a recent 35% increase in Tamil Nadu tariffs
as well as in the imposition of a fuel price adjustment
mechanism and the resolve to review tariffs annually.
Similar exercises have either been concluded or have
been taken up for review across the country.
Looking ahead, however, there are signs that the long
awaited structural changes in the sector, primarily in the
form of realistic tariffs and pricing by the utilities, are
under way. Given the stretched financial position of the
state utilities, the central regulator has directed state
regulators to ensure that tariffs are reviewed annually.
Several state utilities have already, in the last few weeks,
filed applications with their state regulators for significant
tariff increases.
OPG Power Ventures Plc
Annual Report and Accounts 2012
15
Overview
Business Review
Corporate Governance
Financial Statements
Summary and outlook
Overall FY2012 saw OPG deliver earnings per share
of 0.072 pence per share, on an enlarged equity base
of 351 million ordinary shares and progressing all its
projects in a challenging trading environment in which
most of our peers incurred losses and deferred projects.
With the continuing maturing of our capacities, we are
confident that OPG remains on track to achieve its target
of over 700 MW of capacity. Now, with aspects of our
trading environment showing signs of recovery and
should these persist, we look forward to the forthcoming
commissioning of Chennai II and the completion of
construction of Chennai IV in the coming year, as these
will be important milestones in establishing a stable,
multi-asset revenue platform from which to deliver
leading returns to shareholders.
Arvind Gupta
30 June 2012
Tariffs charged to industrial customers under the Group
captive model are correlated to state utility rates and
are therefore expected to rise along with the utility
tariff increases.
Our business and our team are maturing
Over the last two years, OPG has strengthened its own
in-house management capabilities. At the time of our IPO,
we were a young company with a fleet of independent
consultants and companies leading many aspects of
our project implementation, development and operation.
OPG now has 280 employees, many of whom carry
out functions that were in the past out-sourced such as
our new in-house EPC division that completes balance
plant construction and our in-house Operations and
Maintenance teams. Further we have now formalised our
Health & Safety Environment Committee of the Board.
We have also instituted a management Executive
Committee and our initiatives to support and interact
with communities in and around our projects are better
organised. I look forward to our continued maturing and
on behalf of the entire Board want to thank the entire
OPG team and its associates for their continued
enthusiasm and support.
Project commissioning schedule (MW)
Location
Capacity
Economic
interest
Planning
permission
Debt
status
Equity funding
status
Fuel/domestic
linkage
Status
In development
Chennai IV
80 MW
99%
Chennai III
160 MW
99%
Gujarat
300 MW
99%
✓
✓
✓
Bellary
12 MW
99%
To be
obtained
Under
progress
Under
progress
✓
Internal
accruals
✓
✓
✓
✓
✓
Imported
70% Coal
linkage
obtained
Expected
2013
Expected
2014
Expected
2014
Coal linkage
to be obtained
Expected
2014
16
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Maximising Opportunity
The Chennai site hosts four plants with a total capacity of 394 MW
of which 77 MW is in operation and 317 MW under construction.
OPG Power Ventures Plc
Annual Report and Accounts 2012
17
Overview
Business Review
Corporate Governance
Financial Statements
394 MW in operation and under
construction in Chennai
Expansion of capacity is delivered by building
modular plants. The revised configuration of
Chennai III from 2 x 80 MW to 160 MW is expected
to result in savings in coal consumption given the
lower turbine/boiler heat rate for a 160 MW unit. At
the same time, the reduced footprint of a 160 MW
unit makes available space on site for the newly
committed Chennai IV.
Chennai I, II and IV are replica plants with similar
technology and equipment. All Chennai plants
benefit from sharing land, certain infrastructure
and other operational resources.
18
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Continuous Supply
The Electricity Act 2003 opened up the power generation markets to private
players under the Group captive model. OPG’s power plants are set up under
the Group captive model which allows the Group to supply directly to industrial
and commercial customers on short-term contracts whilst the majority of
the industry supplies to the State Electricity Board on long-term contracts.
OPG Power Ventures Plc
Annual Report and Accounts 2012
19
Overview
Business Review
Corporate Governance
Financial Statements
India suffers from acute power shortages
with industrial and commercial customers
facing power cuts regularly. With this
backdrop, hospitals face operational
constraints and in the absence of any
alternatives depend on diesel generated
power which is very costly. OPG’s model
allows power supply directly to such
customers through the state grid, generally
at attractive prices, benefiting them on
cost and being able to receive reliable and
uninterrupted power.
OPG’s customers include hotels, hospitals,
commercial companies and industries.
We see this as a growing opportunity given
the demand – supply gap in the sector.
20
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Strategic Locations
OPG Power Ventures Plc
Annual Report and Accounts 2012
21
Overview
Business Review
Corporate Governance
Financial Statements
Coal is the principal raw material for
coal based thermal power plants and
is obtained either from Indian coal
blocks all of which are controlled by
Coal India Limited a state owned
company or imported from Indonesia,
Australia or South Africa.
Transporting coal from the coal mines by
truck or train can be expensive due to the
distance and sometimes it is not possible
due to inadequate transport infrastructure.
OPG’s principal plant sites have been chosen
to be in close proximity to port e.g. Gujarat
site is 30 kilometres from the port. This allows
OPG to bring Indian coal and imported coal
by sea to the nearest port – thereby reducing
significant land logistics cost.
In addition, our boilers are designed to burn
either domestic or imported coal or any mix
of the two.
Second coal shed under construction –
to be shared by Chennai III and IV
22
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Operational Review
In 2012 the 77 MW Chennai I plant, commissioned during 2010,
made a full year contribution to output. The plant proved its mettle,
surpassing expectations in regard to performance parameters.
Increasing capacity
617 MW of projects under development at Chennai and Gujarat are all
under active construction and due to be commissioned by FY2015
Gujarat boiler foundation work in progress
Production and output levels
Asset
Generation (Mn units)
Availability %
Plant load factor %
OPG Power Generation – Chennai (77 MW)1
OPG Renewable Energy – Chennai (10 MW)2
OPG Energy – Mayavaram (25.4 MW)2
Total
1 Data relates to the full year.
2 2012 data relates to the first eight months of the year.
2012
2011
647.6
30.2
88.2
766.0
329.3
55.6
128.1
513.0
2012
95.1
75.6
97.2
2011
83.8
88.8
91.5
2012
92.2
51.5
59.3
2011
75.3
63.4
81.3
OPG Power Ventures Plc
Annual Report and Accounts 2012
23
Overview
Business Review
Corporate Governance
Financial Statements
Development projects
We are currently developing additional capacity at the
Chennai site of 317 MW through the following projects:
Chennai II
The project is under trials and commissioning from June
2012. The project is on track to commence commercial
operation from September 2012.
Chennai III
Letters of Intent are in place for boiler and steam turbine
generator. Balance of Plant equipment has been ordered.
The power transmission facility for the evacuation of
power is already installed. The plant is expected
to commission in Q3 2014.
Chennai IV
The 80 MW Chennai IV is in an advanced stage of
construction. The major supplies have been received
and installation of equipment is under way. The turbine
is due for mechanical run test (‘MRT’) in BHEL
(manufacturer) works in early July 2012 and thereafter will
be despatched to project site for installation work. The
power transmission facility for evacuation of power is in
place. The plant is expected to commission Q2 of 2013.
Gujarat
The Gujarat 2 x 150 MW project has received all
clearances. Construction activities have commenced
at the project site with major equipment foundations
completed and ready for installation of equipment.
Equipment supplies have commenced from the
BTG supplier, BHEL. The project is expected to be
commissioned in H2 2014 following the move to air-
cooled condensers in place of water cooling.
Bellary
During the year OPG acquired a partially constructed
12 MW thermal power plant in the industrial area of
Bellary, Karnataka. The plant is on a 120 acre site
and has the potential to expand/build up to 350 MW
of capacity.
In 2012 the 77 MW Chennai I plant, commissioned during
2010, made a full year contribution to output. The plant
proved its mettle, surpassing expectations in regard to
performance parameters. The legacy units of 26 MW
and 10 MW did not perform as well and, in fact, output
levels at both of these units declined when compared
to the previous year due to reduced gas and waste
heat availability. The results of these legacy plants are
included in the table for the eight month period up to
30 November 2011.
Chennai I – 77 MW
During the year, the Chennai I plant achieved a PLF of
92.2% and an availability of 95.1%. Chennai I is sustaining
these high levels of performance in the current year too.
The plant has exceeded expectations in the case of
certain operating parameters for plants of this capacity
such as auxiliary power consumption and make-up water
requirements. The plant also achieved the lowest specific
oil consumption (secondary fuel) in the month of April
2012 at 0.05 ml/KWh. The plant has achieved 100%
utilisation of fly ash and bottom ash and no ash is stored
in the dyke in the plant premises, thereby reducing
land use.
The efficiency of the plant has improved over the months
and has been maintaining at near optimum levels since
December 2012. We are confident of maintaining these
high levels of performance for the financial year 2013.
Chennai I – Improvement in consumption parameters
9
8
7
6
5
4
3
2
1
8.024
1.742
1.34
7.718
1.015
0.82
August 2010 – March 2011
April 2011 – March 2012
Auxiliary power consumption (%)
Sp oil consumption (ml/KWh)
DM water makeup (%)
24
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Principal Risks
The Group faces a number of risks to its business and strategy. Management
of these risks is an integral part of the management of the Group. The Group
has in place a process for identifying and managing risks.
The list of principal risks and uncertainties facing the Group’s business set out below
cannot be exhaustive because of the very nature of risk. New risks emerge and the
severity and probability associated with these change over time.
Sector-related risks
Risk
Potential impact
Monitoring and mitigation
Power sale in
the Group
captive model
The Group’s power plants derive their revenue from the Group
captive model selling power to captive consumers and partly from
sale on short-term, medium-term, or long-term sale basis and would,
for this purpose, enter into power purchase agreements with
counterparties such as captive consumers, power trading
companies and state utilities.
– Review contracts periodically to obtain best
possible tariffs
– Flexibility to sell to captive consumers or in the
open market
– Benchmarking captive consumer prices to state
utility prices to benefit from any price increases
Contracts with customers may impose restrictions on the Company’s
ability to, amongst other things, increase prices at short notice and
undertake expansion initiatives with other customers. This could
affect the revenue in the short to medium-term.
Availability of
fuel supply and
costs
The Group has coal linkages with domestic companies and
agreements for imported coal.
– Seeking long-term supplies
– Maintaining adequate storage facility to keep appropriate
The dependence on third parties for coal exposes the Group’s power
plants to vulnerabilities such as non-supply, price increases in the
international market, foreign exchange fluctuations and increases in
shipping costs. This could impact the operations and profitability of
the Group.
levels of surplus stocks
– Maintaining relationship with suppliers and mitigating
any potential disruption
– Developing different sources for fuel supply especially in
the imports market
Timely
execution of
projects
The length of the construction period and the cost to complete
any given project is dependent on third party suppliers and
EPC contractors.
– Close monitoring of projects by the project team and
addressing issues causing delays
– Ordering key equipment and long lead items ahead of
Factors such as disputes with contractors, price increases, and
shortages of construction materials, delays in supply from various
contractors, accidents, unforeseen difficulties, changes in
government policies and delays in receipt of necessary approvals
can lead to cost over-runs and delays impacting the timely
completion and ultimately the profitability of projects.
schedule
– Including liquidated damages clauses in its contracts in
relation to such matters as delays and inferior
workmanship
Funding of
projects
The development of power plants is a capital intensive business and
the Group’s projects require access to both equity and debt markets.
– Assessing financial viability of projects
– Financing projects with an optimum mix of debt and
Delay in raising finance or the terms of debt funding could affect the
timely completion and cost of its projects and servicing of debt.
equity including internal accruals
– Obtaining in-principle project finance from banks before
commencement of projects
– Monitoring cash flows to ensure repayment of debt and
interest in line with schedule
OPG Power Ventures Plc
Annual Report and Accounts 2012
25
Overview
Business Review
Corporate Governance
Financial Statements
Sector-related risks continued
Risk
Potential impact
Monitoring and mitigation
Health,
safety and
environmental
and local
stakeholder
management
The Group’s plants are located in different states and in areas where
there is adequate land to set up projects, water availability and
connectivity to ports. Setting up power projects in such areas may
affect the environment and health and safety.
Changes in legislation and standards, the Group’s failure to control
adequately environmental and health and safety risks or activism by
local groups could have an adverse impact on the operations of
the Company.
– The Group has management systems to monitor the
health, safety and environmental aspects of business.
These are communicated to the relevant businesses
and employees with training provided on a regular basis
– Setting up a formal committee responsible for health,
safety and environmental issues at Board level is under
consideration
– The Group proactively engages with local stakeholders
prior to and during project commissioning to address
concerns
– Working with local communities and implementing
sustainable programmes to aid the development of these
communities
India-specific risks
Risk
Potential impact
Monitoring and mitigation
Government
policy and
regulations
The power industry is heavily regulated with permits and licences
issued by the Indian Government. Further, the regulatory environment
is continuously changing. Obtaining these licences is critical to the
Group’s development plans.
– The Group monitors and reviews changes in the
regulatory environment and its commitments under
licences previously granted
– It continually ensures compliance with the conditions
Failure or delays in receiving permits or approvals could have an
adverse impact on projects and affect the profitability of the Group.
Ability to retain
fiscal and tax
incentives
The Group’s existing and planned power plants are based on the
various fiscal and tax benefits that will be available to the Company
by the federal and state government.
A change in government policy to withdraw these incentives can
have an adverse impact on the profitability of the Group.
contained within individual licences and is mindful of the
importance of complying with national and local legislation
and standards
– The Group maintains an open and proactive relationship
with the Indian Government and its various agencies
– The Group continues to monitor changes and
developments in respect of incentives provided by the
Indian federal and state authorities
– Project investment returns are evaluated based on the
expected incentives available to the Company and are
revised based on the most up to date guidance available
Exchange rate
fluctuations
As a consequence of the international nature of its business, the
Company is exposed to risks associated with changes in foreign
currency exchange rates. The Group’s operations are based in India
and its functional currency is the Indian Rupee although the
presentational currency is Great Britain Pound Sterling.
– Putting in place, where appropriate, forward contracts or
hedging mechanisms
– Monitoring our risk on a regular basis where no hedging
mechanism is in place and taking steps to minimise
potential losses
The Group’s financial results may be affected by appreciation or
depreciation of the value of the foreign exchange rates relative to the
Indian Rupee.
Global financial
instability
The Indian market and Indian economy are influenced by global
economic and market conditions, particularly emerging market
countries in Asia. Financial instability in recent years has inevitably
affected the Indian economy.
– The Group continues to monitor changes and
developments in the global markets to assess the impact
on its financing plans
Continuing uncertainty and concerns about contagion in the wake
of the financial crises could have a negative impact on the availability
of funding.
26
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Financial Review
The following is a commentary on Group financial performance in the year, highlighting the key financial drivers and
performance indicators and financial metrics.
Income statement
Year ended 31 March
Revenue
EBITDA
Net finance costs
Income from continuing operations
(before tax non-operational and/or exceptional items)
Expenditure during the period on expansion projects
Employee stock option charge
Electricity consumption tax relating to prior years
Impact on account of loss of control
Profit before tax
Taxation
Profit after tax
2012
2011
Change
£m
£m
%
45.25
12.57
2.02
9.59
0.63
1.45
0.43
4.82
2.26
2.04
0.22
33.15
15.54
1.32
13.01
0.40
1.45
–
–
11.16
2.41
37%
(19%)
53%
(26%)
58%
0%
(80%)
(15%)
8.75
(98%)
Revenue
OPG revenue has increased by £12.1 million, reflecting a 37% growth year on year, primarily from a full year
contribution by the 77 MW plant, partially offset by inclusion of only eight months results for the 26 MW and
10 MW plant.
Production and output levels from the Group’s operating power plants compared to the prior year were as follows:
Asset
Generation (Mn units)
Availability %
Plant load factor %
OPG Power Generation – Chennai (77 MW)1
OPG Renewable Energy – Chennai (10 MW)2
OPG Energy – Mayavaram (25.4 MW)2
Total
1 Data relates to the full year.
2 2012 data relates to the first eight months of the year.
2012
2011
647.6
30.2
88.2
766.0
329.3
55.6
128.1
513.0
2012
95.1
75.6
97.2
2011
83.8
88.8
91.5
2012
92.2
51.5
59.3
2011
75.3
63.4
81.3
OPG Power Ventures Plc
Annual Report and Accounts 2012
27
Overview
Business Review
Corporate Governance
Financial Statements
Gross profit
Gross profit in 2012 was £14.83m (2011: £14.48m). Gross profit is driven mainly on account of the full year operation of
the 77 MW plant and to an extent offset by the inclusion of only eight months results from the 10 and 26 MW plants.
Reconciliation of gross profit given below:
Particulars
Gross profit in 20121
Gross profit in 2011
Increase in gross profit
Reduced: on account of reduction compared to 2011 in four months for 25 MW plant and 10 MW plant
(compared to previous years)
Reduced: on account of low PLF and increase in fuel gas cost and consumption in 25 MW and 10 MW
for eight months
Increased: on account of increase in generation in 77 MW and net of lower selling price at Rs 3.80
(against Rs 5.05/KWh) for a period of four months
Reduced: effect of incremental inter Group elimination (2012)
Increase in gross profit
1 Excluding electricity consumption tax of £0.93m.
Gross profit margins: plant wise contribution
The gross profit contributions of the three operating plants of the Group are presented below:
£m
14.83
14.48
0.35
(1.74)
(1.66)
4.77
(1.02)
0.35
£m
OPGPG 77 MW
OPGE 26 MW
OPGRE 10 MW
Inter Co., Elimination
Total
2012
2011
Revenue
Cost of revenue1
Gross profit
Gross profit %
38.48
25.92
12.56
33%
21.58
13.87
7.71
36%
2012
5.03
2.89
2.14
43%
2011
8.19
3.99
4.20
51%
2012
1.74
2.07
(0.33)
(19%)
2011
3.37
2.29
1.08
32%
2012
2011
2012
2011
(0.46)
(1.48)
45.25
30.42
14.83
33%
33.15
18.67
14.48
44%
1 Excluding electricity consumption tax of £0.93m.
Gross profit contribution from the 77 MW plant was strong in the year under report. The gross profit margins of the
plant at 33% were only marginally lower (2011: 36%) due to the ability to blend (64:36) high moisture Indonesian coal
with Indian coal the average prices of the latter being lower (note 1 below). However gross profit margins at the 26
MW plant were eroded to 43% (2011: 51%) due to higher gas prices. Due to non-availability of suitable iron ore during
the year, resulting in poor waste heat, the gross profit margins of the 10 MW plant turned negative.
A lower selling price of Rs 3.80/KWh paid by the state utility for June to September 2011 (a claim for higher, agreed
pricing of Rs 5.05 is being pursued). The effect of this on gross profit is also shown plant wise (note 2 below).
Note 1
Indonesian coal – average factory gate price
Indian coal – average factory gate price
Total
2012
% use
Rs/MT
3,940
2,331
64%
36%
Weighted
average
cost for
2011–12
Rs/MT
2,522
839
3,361
2011
3,285
3,285
28
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Financial
Review
continued
Note 2
Particulars
OPGPG
OPGE
OPGRE
£m
£m
£m
£m
Total
Effect in gross profit on account of lower selling price from state utility for
four months
2.116
0.232
0.112
2.460
EBITDA
Earnings Before Interest, Taxation, Depreciation and Amortisation (‘EBITDA’) is a measure of a business cash
generation from operations before depreciation, interest and exceptional and non-standard or non-operational items
such as the annual charge for stock options which is a non-cash item or expenses relating to projects under
construction. This is reconciled with profit after tax as follows:
Year ended 31 March
2012
2011
Change
Profit after tax
Tax
Impact on loss of control
Depreciation
ESOP expenses
Period expenses on projects under development
Net finance cost
Total
Note: Prepayment of Chennai I 77 MW debt for the year 2012 was £4.43m.
Profit before tax
£m
PBT – FY2011–12
PBT – FY2010–11
Decrease in PBT
Impact on deconsolidation of subsidiaries
Electricity consumption tax (prudential provision)
Decrease in administration and selling expenses
Decrease in other income
Increase in net finance cost
Increase in gross profit
Total
£m
0.22
2.04
4.82
1.40
1.45
0.63
2.02
£m
8.75
2.41
0
1.21
1.45
0.40
1.32
%
(98%)
(15%)
15%
0%
58%
53%
12.57
15.54
(19%)
OPGPG
OPGE
OPGRE
7.55
7.79
(0.24)
1.01
3.99
(2.98)
(0.55)
0.83
(1.38)
Non-
operating
entities1 (net
of inter Group
eliminations)
(5.75)
(1.45)
(4.30)
Total
2.26
11.16
(8.90)
(4.82)
(0.92)
0.08
(2.90)
(0.70)
0.35
(8.90)
1
Includes: a) OPG Power Gujarat Pvt Ltd, India b) Gita Power & Infrastructure Pvt Ltd, India c) Caromia Holdings Ltd, Cyprus
d) Gita Energy Pvt Ltd, Cyprus e) Gita Holdings Pvt Ltd, Cyprus
f) OPG Power Ventures Plc, Isle of Man.
Taxation
The Group consolidated PBT at £2.26m is after charging £4.82m towards adjustment in the carrying value of the
legacy plants and £1.45m towards amortisation of employee stock options (both being non-cash charges at the level
of holding company). As such the effective PBT subject to tax is £8.53m.
OPG Power Ventures Plc
Annual Report and Accounts 2012
29
Overview
Business Review
Corporate Governance
Financial Statements
Expenditure on projects
This relates to expenses incidental to projects under construction. These expenses in 2012 were £0.63m in
(2011: £0.40m).
Employee stock option charge
This pertains to the amortisation of the value of stock options granted to certain Directors and is non-cash in nature.
Charge relating to deconsolidation of subsidiaries
During the year both the 10 MW and 26 MW plants were consolidated only for a period of the first eight months of the
year, and were subsequently deconsolidated with effect from 1 December 2011. An independent fair valuation of
these plants has been carried out and accordingly an amount of £4.82m has been charged to the statement of
comprehensive income in the current year.
Profits after tax
Profits after tax have decreased by £8.53m representing a 98% decline, from £8.75m in 2011 to £0.22m in 2012.
Basic earnings per share of 0.072 pence in 2012 has decreased by 97% over 2011.
Property, plant and equipment
Property, plant and equipment has increased by £19.03m, 25.71% year-on-year growth, mainly reflecting the
increase in capital work in progress on account of additional power plants in Chennai and Gujarat and despite
the deconsolidation of the 10 MW and 26 MW power plants.
Other non-current assets
Other non-current assets have decreased by £5.12m by 62% year-on-year primarily as a result of the deconsolidation
of the 26 MW and 10 MW power plants.
Current assets
Current assets have decreased by £14.7m to £117.4m year-on-year primarily as a result of the following:
a) Reduction in the cash and cash equivalents by £33.23m due to the increase in investment in the Gujarat and
additional Chennai power plants, and also due to the deconsolidation of the 10 MW and 26 MW.
b) Increase in trade receivables by £8.83m increase in other assets by £7.35m.
Current liabilities
Current liabilities have increased by £7.04m primarily on account of the increased bank borrowings and buyers credit.
Other non-current liabilities
Other non-current liabilities have increased by £11.42m primarily on account of increase in bank borrowing to meet
the capital project expenses.
Cash flows
Operating cash
Tax paid
Change in working capital assets and liabilities
Purchase of property, plant and equipment (net of disposals)
Other investments
Net cash used in investing activities
Net interest paid
Free cash flow
Equity private placement
Total cash change before net borrowings
2012
2011
£m
£m
12.23
(0.53)
(7.59)
(71.35)
2.59
(68.77)
(4.82)
(69.47)
–
15.15
(1.97)
(9.43)
(19.76)
1.41
(18.35)
(2.65)
(17.25)
57.38
(69.47)
40.14
Operating cash flow decreased from £15.15m in 2011 to £12.23m in 2012, a decrease of £2.92m, or 19%.
The decrease is primarily due to the reduced profit before tax.
30
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Responsible Growth
The Company takes seriously its responsibilities to the
environment and the communities in which the Group
operates. We believe that these responsibilities can
have a positive impact on shareholder returns as well
as on our reputation and growth prospects.
Corporate Social Responsibility
During the year, OPG planted 2,000 saplings with tree guards within the
Chennai premises
Tree Guards to protect our saplings
OPG Power Ventures Plc
Annual Report and Accounts 2012
31
Overview
Business Review
Corporate Governance
Financial Statements
Health and safety
The Board is committed to ensuring that the Group’s
activities do not result in injury or illness to any employee,
contractor or member of the public and strives hard to
prevent work-related incidents, illnesses and injuries.
All operating units must comply with our health and
safety policies in addition to meeting requirements
specific to their businesses as well as customers’
expectations. Specifically, the Group aims to obtain
OHSAS 18001 certification for the Chennai plant in the
near future. The Board is committed to ensuring that
these principles are articulated to all employees and that
they are effectively implemented.
Safety policy is implemented at all project sites and
operating plants by identifying potential risk areas and
taking appropriate steps to mitigate them. These
measures include a programme of training for staff and
contractors, regular safety meetings and a process to
encourage employees to raise their concerns and make
suggestions for improving workplace safety.
Environment
The Group’s operations strive to achieve continuous
improvements in environmental performance and seek
to prevent, mitigate, reduce or offset the environmental
impact of our activities. The Board continues to
monitor the level of environmental incidents and
workplace accidents.
Going Green
OPG’s comprehensive Environmental Management
Systems (EMS) initiatives continued at a renewed pace
during 2011–2012. In addition to a solid waste reduction
and management system implementation, the Company
has initiated processes and systems for getting the
following certifications for the Chennai site:
1. Indian Organization For Standards (ISO 14001)
2. Occupational Health and Safety Assessment
OHSAS 18001
3. Indian Green Building Certification (IGBC)
During the year, OPG also joined hands with the District
Forest Office in planting 2,000 saplings with tree guards
within the Chennai premises. Our dedicated staff
continues to nurture and care for these trees on a
continual basis.
We understand that our approach to addressing the
issue of global warming and reducing carbon emissions
is important to the Group’s future competitiveness. The
Group has therefore registered under the United Nations
Framework Convention on Climate Change and is
awaiting the validation and verification of the Carbon
Emissions Reduction registration for the Mayavaram gas
plant and the Voluntary Emissions Reductions
registration for the 10 MW waste heat plant.
Our people
Employee consultation
The Group places considerable value on keeping
employees informed on matters affecting them and on
the various factors affecting the performance of the
Group. This is achieved through informal meetings and
presentations on new developments both within the
Company and the wider industry. The Group is
committed to providing equal opportunities and opposes
all forms of unfair or unlawful discrimination. Employees
will not be discriminated against because of race, colour,
nationality, ethnic origin, disability, sex or sexual
orientation, marital status or age.
All employees are encouraged to raise genuine concerns
about possible improprieties in the conduct of our
business, whether in matters of financial reporting or
other malpractices, at the earliest opportunity and in an
appropriate way.
Disabled persons
Applications for employment by disabled persons are
always fully considered, bearing in mind the aptitudes of
the applicant concerned. In the event of members of staff
becoming disabled, every effort is made to ensure that
their employment with the Group continues and that
appropriate training is arranged. It is the policy of the
Group that the training, career development and
promotion of disabled persons should, as far as possible,
be identical to that of other employees.
Training and development
Employing the right people and encouraging the
continuous development of the skills of our employees is
critical to developing a successful business. During the
last year, not only were our power generation plants
managed by the Company but day-to-day operational
responsibility, which had in previous years been delegated
to Tata Power, has been taken over by an experienced
in-house team built specifically for this purpose and
trained in best practices by Tata Power. Thus, at the sites
there has been a vast difference from the previous years in
that the full operation, maintenance and project execution
is being undertaken by OPG employees, whereas, earlier
there were relatively few OPG employees on site and the
majority of staff were employed and supervised by Tata
Power. This organisational shift is a key step in the
development of the Group and is a strong indicator that
the Group is maturing with regards to staff training and
health and safety responsibility and implementation.
32
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
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Corporate Governance
Financial Statements
Responsible
Growth
continued
Each of our businesses maintains an accident reporting
system. These systems are used to identify trends with
a view to developing strategies for reducing the number
of reportable as well as non-reportable accidents and
near misses.
Supply chain
The Group works with a team of industry-leading
suppliers and contractors in order to mitigate the risk in
the event of there being a product delay or a supplier
failing. The Board recognises the particular risks posed
to its supply chain by the prevailing global economic
conditions and the potential impact should key suppliers
fail. To mitigate these impacts, the Group monitors
suppliers’ business continuity issues, providing such
practical support and advice as may be appropriate.
The Company’s power generation plants are fuelled by
coal sourced from India but also from imported coal from
Indonesia. Availability of supplies is therefore less of an
issue than prices, which can fluctuate in line with world
market forces of supply and demand.
Community
The Group recognises the importance of engaging with
the communities in which it operates. It encourages
operating units to develop their own corporate social
involvement plans in consultation with stakeholders in
order to identify programmes with tangible and
sustainable community benefits in line with our corporate
social involvement policy.
Educational aid
OPG has continued to provide educational assistance in
the local area near our power plants. During June 2011,
fifteen school children at Kayalarmedu village were
offered full year scholarships. 600 children belonging to
the villages Periya Obulapuram, Chinna Obulapuram and
Kayalarmedu received school supplies for the entire year
before the commencement of the school year. In
Bhadreshwar, near the Kutch site, OPG provided to all
students of Bhadreshwar High School supplies including
uniforms, stationery and sports equipment.
School children receive books
OPG Power Ventures Plc
Annual Report and Accounts 2012
33
Overview
Business Review
Corporate Governance
Financial Statements
OPG outreach
We are proud to report that OPG Outreach, launched in
July 2011 near our Kutch site, has completed one
successful year. During this year, 120 women have
completed the training programme and 32 women have
started working and making products, which are being
purchased by our collaborator, Welspun. The additional
income from this has greatly augmented the monthly
household income of these families. OPG has provided
the entire infrastructure for the training programme and
the work centre including equipment, utilities and
supplies. Going forward, we expect more women to
enrol in the training programme and to eventually start
work at the work centre, both of which will empower the
local women and contribute greatly to the socio-
economic development of the surrounding community
and families.
Our team of civil engineers assisted in developing the
infrastructure facilities in these schools. They designed
and constructed a compound wall for the school at
Sirupuzhal pattai village and it stands today to provide
a safe and secure school premises to the children
attending there.
OPG also partnered with non-governmental organisations
during the year to reach out to the educational needs
of children in neighbouring districts. One of our key
involvements is with Duraimurugan Educational Trust,
which strives to keep children in school in spite of the
economic crisis faced by their families.
Flood relief
OPG working with the local government bodies provided
basic provisions to the local populations after the floods
of November 2011. We donated food supplies such
as rice to the villagers of the flood affected regions of
Chinna Obulapuram and essential clothing in the form
of sarees and dhoties to 350 villagers of Papankuppam
and Kayalarmedu.
Jivan Prabhat
34
OPG Power Ventures Plc
Annual Report and Accounts 2012
Overview
Business Review
Corporate Governance
Financial Statements
Board of Directors
Mr Munish C Gupta
Non-executive Chairman
Mr Munish C Gupta is a retired senior civil servant of the Indian
Administrative Service, the premier civil service of India. During
his service, Mr Gupta held a number of senior appointments,
notably those of Secretary, Ministry of Industry, Government of
India and Chief Secretary to the Government of Haryana state.
As Secretary to the Ministry of Industry, Mr Gupta was one of
the civil service officers responsible for initiating and
implementing the process of economic reforms which began in
the 1990s in India and which continue to this day.
Mr Gupta serves on the boards of a number of public
companies in India including Bhansali Engineering Polymers Ltd
and Lumax Industries Ltd as an independent director. Mr Gupta
is not related to either Arvind or Ravi Gupta.
Mr Arvind Gupta
Managing Director and Chief Executive Officer
Mr Arvind Gupta graduated with a degree in Commerce at
the University of Madras and joined the OPG family business,
OPG Enterprises, in 1979. Mr Gupta gained experience in
various divisions of the business including flour milling, steel
production and logistics, becoming President of Kanishk
Steel, listed on the Bombay Stock Exchange. Having identified
the opportunities in power generation, Mr Gupta developed
this division within Kanishk Steel with initial projects in wind
power generation in 1994. He was the pioneer of the Group
captive power producer concept in Tamil Nadu state and
developed the 18 MW gas fired plant of OPG Energy, a
Group entity, through to successful operation in 2004.
Since then, Mr Gupta has been responsible for the construction
and development of the power plants of the OPG Group as well
as its overall strategy, growth and direction.
Mr V Narayan Swami
Finance Director
Mr V Narayan Swami has over 30 years’ experience of finance
and management. Mr Swami started his career with the State
Bank of India before moving to Ashok Leyland Limited in 1976.
For 10 years until 1992, he held a variety of positions within
Standard Chartered Bank including as Senior Manager,
Corporate Division for Southern India. Later Mr Swami joined
Essar Global, subsequently becoming CFO of Essar Telecom
Group where he played a key role in the entry and planned exit
of Swisscom from the venture along with the simultaneous
investment by Hutchinson Whampoa.
Mr Swami was Group CFO and Director of Best & Crompton
Engineering, listed on the Bombay Stock Exchange, before
joining the Group in 2007 as Finance Director.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements OPG Power Ventures Plc
Annual Report and Accounts 2012
35
Overview
Business Review
Corporate Governance
Financial Statements
Mr Martin Gatto
Senior Independent Non-executive Director
Mr Martin Gatto has considerable experience as a senior
financial professional and has worked at a number of large UK
quoted public companies. During his career, Mr Gatto gained
international experience at Hilton International Company where
he was responsible for business development and property.
Later, as Chief Financial Officer of British Energy plc, Midlands
Electricity plc and Somerfield plc, he was responsible for the
successful execution of turnaround strategies. Until recently,
Mr Gatto was Non-executive Chairman of Neutrahealth plc,
an AIM-listed company. He is also Chairman of Medico-Dental
Holdings Limited.
He is a graduate of Brunel University and is a Fellow of the
Chartered Institute of Management Accountants.
Mr P Michael Grasby
Independent Non-executive Director
Mr P Michael Grasby is a Chartered Engineer and has been
associated with the UK and international power industry for
many years. He was manager of the Drax Power Station
between 1991 and 1995 and Director of Operations for National
Power, with responsibilities for over 16,000 MW of generating
capacity, until 1998. Following the demerger of National Power
in 1999, he joined International Power as Senior Vice-President
for global operations and retired in 2002.
Mr Grasby has held power company directorships in the Czech
Republic, Portugal, Turkey and Pakistan. Mr Grasby was formerly
a Non-executive Director of Drax plc until April 2011 where he
chaired the Health and Safety Committee and sat on the Audit,
Remuneration and Nominations Committees.
Mr Ravi Gupta
Non-executive Director
Mr Ravi Gupta is the brother of Mr Arvind Gupta and
throughout his career has been involved with family
businesses. He is one of the founders of Kanishk Steel
and is Chairman of that company. Mr Gupta has also
been associated with the flour milling industry, setting up
a new flour mill in 1988 in Tamil Nadu state, Salem Food
Products Limited, where he is Managing Director.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 36
Corporate Governance
M C Gupta
Non-executive Chairman
Introduction
The Board is committed to good corporate
governance practices. The Company was admitted
to trading on AIM in May 2008. Accordingly,
compliance with the governance framework
contained in the UK Corporate Governance Code
published by the Financial Reporting Council
(the ‘Code’) is not mandatory. Nevertheless, the
Company remains committed to high standards of
corporate governance and endeavours to comply
with the Code to the extent practicable for a public
company of its size.
This report describes how the Company has applied,
or how it intends to apply, the principles set out in
the Code.
.
Compliance with the code
Since admission to AIM, the Board had taken a number of steps
to comply with the Code with the longer term objective of achieving
full compliance in all material respects. The Board continues to
make progress in this regard and is continuing to develop the
following initiatives:
1. Schedule of matters reserved (A.1.1)
The Board has agreed to formalise in due course a schedule of
matters specifically reserved to it for decision. At present, the Board
reviews and adopts the Group’s strategy, plan and key risks, policies
and procedures. During the current year an Executive Committee
(‘ExCo’) of management was established to support the Board in
implementing strategy and it is the Exco’s responsibility to report
relevant matters arising in the ExCo to the Board for its consideration
and approval.
2. Division of responsibilities (A.2.1)
As explained in greater detail below, there is a clear separation
between the roles and responsibilities of the Chairman and Chief
Executive Officer. The Code requires that this be set out in writing and
agreed by the Board and this is to be done in due course.
3. Non-executive Directors (A.4.2)
The Board takes note of the requirements under the Code that the
Chairman holds formal meetings with the Non-executive Directors
without the executives present and this is to be commenced going
forward. Further, the Code requires the Non-executive Directors to
meet without the Chairman to appraise the Chairman’s performance,
a process which at this stage of the Company’s development the
Board believes is early to adopt.
4. Nominations Committee (B.2.1)
The Board will at an appropriate time establish a Nominations
Committee and is finalising its terms of reference. It will meet as and
when required, its primary function being to provide a formal and
transparent procedure for the appointment of new Directors to the
Board and to advise generally on issues relating to Board composition
and balance. In appropriate cases, recruitment consultants may be
used to assist in the process.
5. Evaluation (B.6)
At its meeting in August 2011, the Board considered a paper
outlining the benefits of evaluating the effectiveness of the Board,
its committees and the individual Directors. It was agreed that the
matter would be given further consideration with a view to adopting a
process. It has now been agreed to requisition the services of external
consultants to design a suitable process for the Board that can be
implemented informally at first and more formally over time.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
37
6. Audit and Remuneration Committees: independence
(C.3.1 and D.2.1)
The Code states that audit and remuneration committees should
comprise at least three or, in the case of smaller companies, two
independent Non-executive Directors. Munish Gupta, Michael Grasby
and Martin Gatto are considered to be independent under the Code.
However, Ravi Gupta does not meet the independence criteria set
down in the Code. Mr Gupta is the brother of Arvind Gupta, Managing
Director and CEO. Nevertheless, the Board considers him to be of an
independent cast of mind and as a founder and Chairman of Kanishk
Steel (listed on the Bombay Stock Exchange since 1991), his industry
experience to be of particular relevance and value to the deliberations
of the Board and its Committees.
Operation of the Board
Board of Directors
The Board comprises the following individuals:
Executive
1. Arvind Gupta (Managing Director and Chief Executive Officer); and
2. V Narayan Swami (Finance Director).
Non-executive
1. Munish Gupta (Non-executive Chairman);
2. Martin Gatto (Senior Independent Director);
3. Michael Grasby; and
4. Ravi Gupta.
Chairman, Chief Executive Officer and Senior Independent Director
The roles of the Chairman and Chief Executive Officer are held by
different individuals and there is a clear separation of roles.
The Chairman’s key responsibilities are the
effective running of the Board, ensuring that
the Board plays a full and constructive part
in the development and determination of the
Group’s strategy and overseeing the Board’s
decision-making process.
The key responsibilities of the Chief Executive
Officer are managing the Group’s business,
proposing and developing the Group’s
strategy and overall commercial objectives in
consultation with the Board and, as leader
of the executive team, implementing the
decisions of the Board and its committees.
Martin Gatto, the Senior Independent Director,
is available to shareholders who have concerns
that cannot be resolved through discussion
with the Chief Executive Officer or Chairman.
The Board considers that, as at the date of this report, it complies
with Code provision B.1.2, which requires that, in the case of smaller
companies, there should be a minimum of two independent Non-
executive Directors. In addition to the Chairman, Michael Grasby and
Martin Gatto are considered to be independent under the Code.
Biographical details of all the Directors at the date of this report are
set out on pages 34 to 35 together with details of their membership,
as appropriate, of the Board committees. The Board is responsible for
setting the Company’s objectives and policies and providing effective
leadership and the controls required for a publicly listed company.
Directors receive papers for their consideration in advance of each
Board meeting, including reports on the Group’s operations, to ensure
that they remain briefed on the latest developments and are able to
make fully informed decisions. The Board met four times during the
year under review. All Directors have access to the advice and services
of the Company Secretary, who is responsible for ensuring that Board
procedures are followed and that applicable rules and regulations are
complied with.
Directors have the right to request that any concerns they have are
recorded in the appropriate committee or Board minutes.
The Company maintains Directors’ and officers’ liability insurance and
indemnity cover, the level of which is reviewed annually.
Re-election of Directors
At every AGM, one-third of the Directors for the time being (excluding
any Director appointed since the previous AGM) or, if their number
is not three or a multiple of three, the number nearest to one-third,
shall retire from office by rotation. On this basis, Martin Gatto and
Michael Grasby will offer themselves for re-election at the AGM on
18 September 2012.
Information and professional development
Preliminary to the Company’s admission to AIM in May 2008, all
Directors received a briefing from the Company’s nominated advisor
of their duties, responsibilities and liabilities as directors of an AIM
company. Directors are encouraged to keep abreast of developments
and attend training courses to assist them with their duties.
In addition to the formal meetings of the Board, the Chairman
maintains frequent contact with the other Non-executive Directors to
discuss any issues of concern they may have relating to the Group or
as regards their area of responsibility and to keep them fully briefed on
ongoing matters relating to the Group’s operations.
The Chairman is responsible for ensuring that new Directors each
receive a full, formal and tailored induction on joining the Board as
required by provision B.4.1 of the Code.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 38
Corporate Governance continued
Board performance
Since the Company’s admission to AIM in May 2008, the Board has
had an opportunity to develop a working relationship to the extent that
a meaningful evaluation of the Board, its committees and the individual
Directors can now take place. Accordingly, as reported above, it has
been agreed to requisition the services of external consultants to
design a suitable process for the Board that can be implemented
informally at first and more formally over time.
Meetings of the Board and its Committees
The following table sets out the number of meetings of the Board and
its Committees during the year under review and individual attendance
by the relevant members at these meetings:
Board meetings
Board committee meetings
Audit
Remuneration
Number Attended
Number Attended
Number Attended
4
4
4
4
4
4
4
3
3
3
4
4
3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2
2
2
2
2
2
2
2
2
–
–
–
–
–
–
–
–
0
Arvind Gupta
Narayan Swami
Munish Gupta
Martin Gatto
Michael Grasby
Ravi Gupta
Number of
meetings held
during the year
Board committees
Audit Committee
The members of the Audit Committee are Munish Gupta, Martin Gatto,
Michael Grasby and Ravi Gupta. Martin Gatto is considered to have
recent, relevant financial experience. The Chief Executive and Finance
Director and a representative of the auditors are normally invited to
attend meetings of the Committee.
The primary duty of the Audit Committee is to oversee the accounting
and financial reporting process of the Group, the external audit
arrangements, the internal accounting standards and practices, the
independence of the external auditor, the integrity of the Group’s
external financial reports and the effectiveness of the Group’s risk
management and internal control system. At least once a year the
Audit Committee will also meet the Group’s external auditors without
management present.
The Audit Committee has considered the following matters during the
year under review:
> The reappointment of Grant Thornton as auditors to the Company;
and
> reviewing the integrity of the Group’s preliminary and half year
results announcements and any other formal announcement
relating to its financial performance.
Remuneration Committee
The members of the Remuneration Committee are Munish Gupta,
Martin Gatto, Michael Grasby and Ravi Gupta.
The primary duty of the Remuneration Committee is to supervise and
determine on behalf of the Board the Group’s policy and its
implementation in relation to the remuneration of the Executive
Directors and senior managers of the Group. The remuneration of
the Non-executive Directors is a matter for the executive members
of the Board. No Director may be involved in any decisions as to his
own remuneration.
Full details of the role and composition of the Remuneration Committee,
the remuneration policy of the Company and its compliance with the
Code Provisions relating to remuneration are set out in the Directors’
Remuneration Report on pages 40 to 43.
Accountability and audit
Risk management and internal control
The Board has overall responsibility for the Group’s system of internal
control which includes risk management. The Board has delegated
the responsibility for reviewing the effectiveness of its internal control
systems to the Audit Committee. The Audit Committee will review
these systems, policies and processes for tendering, authorisation
of expenditure, fraud and the internal audit plan, on an annual basis.
The system of internal control is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against material
misstatement or loss.
The Audit Committee will assist the Board in discharging its review
responsibilities. A summary of the key risks facing the Group and
mitigating actions is described on pages 24 to 25.
Assurance
With Grant Thornton having been auditors for two years, the Committee
considers it appropriate to review their independence and effectiveness
at the end of this financial year. The Committee considers that, at this
early stage in the Group’s development, it is more efficient to use a
single audit firm to provide certain non-audit services for transactions
and tax matters. However, to regulate the position, the Committee will
establish a policy on the provision of non-audit services by the external
auditor. That policy will set out the external auditor’s permitted and
prohibited non-audit services and a fee threshold requiring prior approval
by the Audit Committee for any new engagement.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 39
Going concern
The Group closely monitors and manages its liquidity risk. In assessing
the Group’s going concern status, the Directors have taken account
of the financial position of the Group, anticipated future trading
performance, its bank and other facilities, its capital investment plans
and forecast gross operating margins.
The Group requires funds both for short-term operational needs as
well as for long-term investment programmes mainly in growth
projects. The Group generates sufficient cash flows from its current
operations which, together with the available cash and cash
equivalents and liquid financial asset investments, provide liquidity both
in the short-term as well as in the long-term. The IPO in 2008 and our
equity raising of c. £60 million in February 2011 have further
strengthened the Group’s financial position and, are expected to be
sufficient to meet the ongoing capital investment programme and
liquidity requirement of the Group in the foreseeable future ability to
meet its financial obligations as they fall due.
On this basis, after making appropriate enquiries, the Directors consider
that the Group has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing the 2012 accounts.
Shareholder relations and the AGM
The Chief Executive, Senior Independent Director and Finance Director
met with a number of key investors during the year, accompanied by
Non-executive Directors as appropriate.
The Chairman will be primarily responsible for ensuring the effective
communication of shareholders’ views to the Board as a whole and
will update the Board accordingly. Board members will seek to keep
abreast of shareholder opinion and to discuss strategy and
governance issues with them as appropriate.
The Annual General Meeting of the Company will be an opportunity
to communicate with shareholders and the Board welcomes their
participation. Notice of the Annual General Meeting will be sent to
shareholders at least 21 days before the meeting. The voting results
will be made available on the Company’s website following
the meeting.
Corporate information including the Annual Report and other financial
information and announcements will be made available on the
Company’s website at www.opgpower.com.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 40
Directors’ Remuneration Report
Introduction
This report sets out information about the remuneration of the
Directors of the Company for the year ended 31 March 2012. This
report has been substantially prepared in accordance with Schedule 8
of the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (the ‘Regulations’) in line with the
relevant requirements of the Financial Services Authority’s Listing
Rules. Part II of this report has been audited by Grant Thornton in
accordance with the Regulations.
Part 1 – unaudited information
Remuneration Committee
The members of the Remuneration Committee are Munish Gupta,
Martin Gatto (Chairman), Ravi Gupta and Michael Grasby who, with the
exception of Ravi Gupta, are all independent Non-executive Directors.
Terms of reference have been approved for the Remuneration
Committee and its primary duty is to supervise and determine on
behalf of the Board the Group’s policy and its implementation in
relation to the remuneration of the Executive Directors and senior
managers of the Group. The remuneration of the Non-executive
Directors is a matter for the Chairman and the executive members of
the Board.
Remuneration policy
The Remuneration Committee has agreed a remuneration policy to
ensure that the Company is able to attract, retain and motivate its
Executive Directors and senior management.
The retention of key management and the alignment of management
incentives with the creation of shareholder value are key objectives of
this policy.
The Group operates in a highly competitive environment. For the
Group to continue to compete successfully, it is essential that the
level of remuneration and benefits offered achieves the objectives of
attracting, retaining, motivating and rewarding the necessary high
calibre of individuals at all levels across the Group.
The Group therefore sets out to provide competitive remuneration
to all its employees, appropriate to the business environment in the
market in which it operates. To achieve this, the remuneration package
is based upon the following principles:
> total rewards should be set to provide a fair and attractive
remuneration package;
> appropriate elements of the remuneration package should be
designed to reinforce the link between performance and reward; and
> Executive Directors’ incentives should be aligned with the interests
The main responsibilities of the Committee are to:
> assess and set compensation levels for the Executive Directors and
of shareholders.
senior managers;
> review the ongoing appropriateness and relevance of the
remuneration policy to ensure that members of the executive team
are provided with incentives that encourage enhanced
performance;
> review the design of share incentive plans for the approval of the
Board and shareholders;
> determine the policy for, and scope of, pension arrangements for
each Executive Director and senior manager; and
> ensure that contractual terms on termination are such that failure is
not rewarded and that the duty to mitigate losses is fully recognised
in the drafting of Directors’ service agreements and letters of
appointment.
In fulfilling these duties, the Committee shall be cognisant of
remuneration trends across the Group and within the sector in which
the Group operates.
The Chief Executive Officer and external advisors may be invited to
attend meetings of the Remuneration Committee but do not take part
in the decision making.
Attendance at meetings of the Remuneration Committee by individual
members is detailed in the Corporate Governance Report on page 38.
The remuneration strategy is designed to be in line with the Group’s
fundamental values of fairness, competitiveness and equity and also to
support the Group’s corporate strategy. A cohesive reward structure
consistently applied and with links to corporate performance, is seen
as critical in ensuring attainment of the Group’s strategic goals.
The Group will increasingly align the interests of shareholders with
those of Directors and senior employees by giving the latter
opportunities and encouragement to build up a shareholding interest
in the Company.
Long-term incentives
The Remuneration Committee believes that it is appropriate to operate
share incentive schemes to encourage Executive Directors and senior
employees to meet the Group’s long-term strategic and financial
objectives set by the Board.
Stock option plan
The Directors and other senior management may be granted awards
under the stock option plan approved by the Board on 16 July 2009.
Options granted must be exercised within 10 years of the date of
grant and vesting depends on achievement of the following
performance conditions:
1. the power plant at Kutch in the state of Gujarat must have been in
commercial operation for three months; and
2. the closing share price must be at least £1 for three consecutive
business days.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 41
Annual bonus
No bonuses were paid during the year.
Service agreements, notice periods and termination payments
The service agreements for the Executive Directors are for no fixed term and may in normal circumstances be terminated on the notice periods
set out in the table below. The Company reserves the right and discretion to pay the Executive Directors in lieu of notice. If the Company
terminates the employment of an Executive Director by exercising its right to pay in lieu of notice, the Company is required to make a payment
equal to the aggregate of basic salary and the cost to the Company of providing other contractual benefits for the unexpired portion of the
duration of any entitlement to notice.
The key terms of the Executive Directors’ service agreements are as follows:
Name
Position
Date of contract
Notice period
Current salary* (p.a.) £
Arvind Gupta
Managing Director and
Chief Executive Officer
23 May 2008
12 months’ prior written notice on either side
156,474
V Narayan Swami Finance Director
23 May 2008
Three months’ prior written notice on either side 46,942
* Under their service agreements, Mr Gupta and Mr Swami are entitled to medical, travel, insurance and accommodation and other allowances, which are included in their gross salaries.
Chairman and Non-executive Directors
The remuneration of the Chairman of the Company and the Non-executive Directors consists of fees that were paid quarterly in arrears. The
Chairman and Non-executive Directors did not participate in any long-term incentive or annual bonus schemes, nor did they accrue any pension
entitlement. Neither the Chairman nor any of the Non-executive Directors has a contract of employment with the Company. Each has instead
entered into a contract for services with the Company.
Non-executive Directors’ contracts for services
Non-executive Directors were appointed for an initial term of 12 months. Munish Gupta, Martin Gatto, Michael Grasby and Ravi Gupta have
each signed a contract for services with the Company. They were each appointed for an initial period of 12 months and, under the terms of their
contracts for services, their appointments were renewable for a further period by mutual agreement, subject to re-election, when appropriate, by
the Company in general meeting. A formal process for evaluating the performance of the Board, its committees and the individual Directors will
be introduced in due course.
The key terms of the Non-executive Directors’ letters of appointment are as follows:
Director
Date of appointment
Notice period
Munish Gupta
Martin Gatto
Michael Grasby
Ravi Gupta
6 May 2008
6 May 2008
6 May 2008
12 May 2008
12 months’ prior written notice on either side
Three months’ prior written notice on either side
Three months’ prior written notice on either side
12 months’ prior written notice on either side
Fees (p.a.) £
25,000
25,000
25,000
25,000
External appointments
It is the Board’s policy to allow the Executive Directors to accept directorships of other companies provided that they have obtained the consent
of the Board. Any such directorships must be formally notified to the Board.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 42
Directors’ Remuneration Report continued
Directors’ interests in ordinary shares
The interests of Directors in the ordinary share capital of the Company during the year were as follows:
Gita Investments Limited1
Gita Power Inc
Sri Hari Vallabha Enterprises & Investments Private Limited1
Dhanvarsha Enterprise & Investments Private Limited1
Goodfaith Vinimay Private Limited1
Michael Grasby
Martin Gatto
Total
Note:
1 Beneficial interest in these shareholdings vests with Arvind Gupta.
31 March 2012
1 April 2011
153,061,225
153,061,225
17,006,802
17,006,802
3,401,361
3,401,361
2,551,020
2,551,020
2,551,020
2,551,020
10,000
60,000
5,000
50,000
178,641,428
178,626,428
There were no changes to Directors’ interests between 31 March 2012 and the date of this report.
No Director had any interest in any contract of significance with the Group during the year ended 31 March 2012 other than their service
contracts, details of which are given on page 41.
Part II – audited information
Directors’ remuneration for the period 1 April 2011 to 31 March 2012:
Salary, annual bonus and benefits
Non-executive Chairman
Munish Gupta
Executive Directors
Arvind Gupta
V Narayan Swami
Non-executive Directors
Martin Gatto
Michael Grasby
Ravi Gupta
Total
Salary/fees Benefits-in-kind
Annual bonus
Total 2012
Total 2011
25,000
156,474
46,942
25,000
25,000
25,000
303,416
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,000
25,000
156,474
169,109
46,942
50,734
25,000
25,000
25,000
25,000
25,000
25,000
303,416
319,843
Notes:
1 No consideration was paid or received by third parties for making available the services of any executive or Non-executive Director.
2 Under their service agreements, Mr Gupta and Mr Swami are entitled to medical, travel, insurance and accommodation and other allowances, which are included in their gross salaries.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
43
Directors’ share options
Options outstanding as at 31 March 2012
Option granted
Option price £
1 April 2011
Lapsed
Exercised
31 March 2012
Latest exercise date
Gita Investments Limited
16 July 2009
£0.60
21,524,234
Martin Gatto
16 July 2009
£0.60
1,000,000
Nil
Nil
Nil
Nil
21,524,234 By 15 July 2019
1,000,000 By 15 July 2019
Movements during the period
At 31 March 2012 the closing mid-market price of the Company’s shares was 50p. During the year under review, the Company’s closing
mid-market share price ranged between a low of 35p and a high of 97p.
This report has been approved by the Board of Directors of the Company.
Munish Gupta
Chairman Remuneration Committee
30 June 2012
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 44
Directors’ Report
The Directors present their report, together with the audited financial
statements of the Group, for the year ended 31 March 2012.
The interests of the Directors in the shares of the Company are shown
in the Directors’ Remuneration Report on page 42.
1. Incorporation
The Company is incorporated and domiciled in the Isle of Man.
Biographies of all the Directors at the date of this report are set out on
pages 34 to 35.
2. Principal activities
The principal activities of the Group are developing, owning and
operating power stations in India. Electricity generated from its plants
is sold principally to captive consumers or in the short-term market in
India and to the State Electricity Board.
The subsidiary and associated undertakings principally affecting the
results or net assets of the Group in the year are listed in note 3.3 to
the financial statements.
3. Business review
A review of the Company’s business, its principal activities and future
development can be found in the pages listed below and are
incorporated into this report by reference:
i. key performance indicators on pags 8 to 9;
ii. Chairman’s and CEO’s statements on pages 10 to 15;
iii. the Operational Review, including details of the main trends and
factors likely to affect the future development, performance and
position of the business, on pages 22 to 23;
iv. the Responsible Growth Report on pages 30 to 33.
The Business Review has been prepared to provide the Company’s
shareholders with a fair review of its business and a description of the
principal risks and uncertainties facing it. It may not be relied upon by
anyone, including the Company’s shareholders, for any other purpose.
Information about the use of financial instruments by the Group is
given in note 25 to the consolidated financial statements.
4. Dividends
The financial statements for the year ended 31 March 2012 are set
out on pages 47 to 77. The Board does not recommend the payment
of a final dividend, considering the need to conserve cash for the
continuing expansion of the business. No dividend was paid for the
half year to 30 September 2011 (no dividend was paid for the year
ended 31 March 2011).
5. Directors
Details of changes to the Board during the period and of the Directors
offering themselves for re-election at the forthcoming AGM are set out
in the Corporate Governance Report on pages 36 to 39.
Details of Directors’ service agreements are set out in the Directors’
Remuneration Report on page 41.
6. Directors’ liability insurance and indemnities
The Company maintains liability insurance for the Directors and officers
of all Group companies.
Indemnities are in force under which the Company has agreed to
indemnify the Directors to the extent permitted by applicable law and
the Company’s Articles of Association in respect of all losses arising
out of, or in connection with, the execution of their powers, duties and
responsibilities as Directors of the Company or any of its subsidiaries.
7. Substantial shareholdings
The Company has been notified of the following interests in 3% or
more of the Company’s total voting rights at 30 June 2012:
Percentage of
voting rights and
issued share
capital
Number of
ordinary shares
Gita Investments Limited
50.82% 178,641,428
M&G Investment Management
Limited
12.33% 43,347,803
Audley Capital Advisors LLP
7.46% 26,210,650
Legal & General Investment
Management Limited
5.98% 21,060,627
FOUR Capital Partners Limited
3.82% 13,425,006
8. AGM
This year’s AGM will be held at our registered office at 12.30pm on
18 September 2012. The notice convening the meeting, together
with details of the special business to be considered and explanatory
notes for each resolution, is contained in a separate document to be
sent to shareholders. It will also be available on the Company’s
website, www.opgpower.com, where a copy can be viewed and
downloaded in a pdf format which may be printed or saved by
following the link to the Investor Centre/Shareholder Circulars.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
45
9. Employees
The average number of employees within the Group as at 31 March
2012 was 242.
Details of share schemes are set out in note 17 to the consolidated
financial statements and in the Directors’ Remuneration Report on
page 40.
Powers of the Directors
With regard to the appointment and replacement of Directors, the
Company is governed by its Articles, the Act and related legislation.
The Articles themselves may be amended by special resolution of
the shareholders. The powers of the directors are described in the
Corporate Governance Report on page 37.
By order of the Board
Philip Scales
Company Secretary
OPG Power Ventures Plc
Ioma House
Hope Street
Douglas
Isle of Man
IM1 1AP
30 June 2012
10. Audit information
As required by Section 418 of the Companies Act 2006, each Director
serving at the date of approval of the financial statements confirms that:
1. to the best of their knowledge and belief, there is no information
relevant to the preparation of their report of which the Company’s
auditors are unaware; and
2. each Director has taken all the steps a Director might reasonably
be expected to have taken to be aware of relevant audit information
and to establish that the Company’s auditors are aware of that
information.
11. Auditors
Grant Thornton have expressed their willingness to continue in office
as auditors and a resolution proposing their reappointment will be
proposed at the forthcoming AGM.
12. Additional information
Articles of Association
The following narrative summarises information relating to certain
provisions in the Company’s Articles of Association and applicable Isle
of Man law concerning companies (the Companies Act 2006 as
amended by the Isle of Man Companies (Amendment) Act 2009 (the
‘Act’)). This is a summary only and the relevant provisions of the Act or
the Articles should be consulted if further information is required.
Share capital structure
Details of the issued share capital, together with details of movements
in the Company’s issued share capital during the year are shown in
note 16 to the consolidated financial statements.
The Company has one class of ordinary share which carries no right
to fixed income. Each share carries the right to one vote at general
meetings of the Company. Under its Articles, the Directors have
authority to issue on a non-pre-emptive basis up to 15% of the
Company’s share capital in each financial year.
There are no specific restrictions on the size of a holding nor on the
transfer of shares, which are both governed by the general provisions
of the Articles and prevailing legislation. The Directors are not aware
of any agreements between the holders of the Company’s shares
that may result in restrictions on the transfer of securities or on voting
rights. No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
The Company made no purchases of its own ordinary shares during
the year.
A resolution will be proposed at the forthcoming AGM seeking renewal
of the shareholders’ approval to make market purchases of its own
shares. Such authority will be exercised having regard to applicable
guidelines of the Investor Protection Committees.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 46
Statement of Directors’ Responsibilities in Respect of the Accounts
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the Group and the Parent
Company financial statements. The Directors are required to prepare
financial statements for the Group in accordance with International
Financial Reporting Standards (‘IFRS’) as adopted for use in the
European Union and have also elected to prepare financial
statements for the Company in accordance with IFRS as adopted
for use in the European Union. Company law requires the Directors
to prepare such financial statements in accordance with IFRS and
the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and of the Company, for safeguarding
the assets, for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
Group website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ
from legislation in other jurisdictions.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Group’s and
Company’s financial position, financial performance and cash flows.
This requires the fair presentation of the effects of transactions, other
events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expenses set out
in the International Accounting Standards Board’s ‘Framework for the
Preparation and Presentation of Financial Statements’. In virtually all
circumstances, a fair presentation will be achieved by compliance
with all applicable International Financial Reporting Standards.
Directors are also required to:
– select suitable accounting policies and apply them consistently;
– make judgements and estimates that are reasonable and prudent;
– state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
– present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information; and
– provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 47
Independent Auditors’ Report to the Members of OPG Power Ventures Plc
Opinion on financial statements
In our opinion the financial statements give a true and fair view, in
accordance with International Financial Reporting Standards (‘IFRS’)
(as adopted by the European Union), of the state of the Group’s
affairs as at 31 March 2012 and of their profit and loss for the year
then ended.
Grant Thornton
Chartered Accountants
Third Floor
Exchange House
54/58 Athol Street
Douglas
ISLE OF MAN
IM1 1JD
30 June 2012
We have audited the consolidated financial statements of OPG Power
Ventures Plc for the year ended 31 March 2012 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated Statement of
Changes in Equity, the Consolidated and Company Statements of
Cash Flow and the related notes. The financial reporting framework
that has been applied in their preparation is applicable law and
International Financial Reporting Standards (‘IFRS’) (as adopted by the
European Union).
This report is made solely to the Company’s members, as a body, in
accordance with our engagement with them. Our audit work has been
undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditors’ report and for
no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ responsibilities statement on
page 46, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and
fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
Scope of the audit
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the
Company’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the Directors; and the overall presentation of the
financial statements.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 48
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2012
(All amounts in £, unless otherwise stated)
Particulars
Revenue
Cost of revenue
Gross profit
Other income
Distribution cost
General and administrative expenses
Operating profit
Financial costs
Financial income
Loss on deconsolidation of subsidiaries
Profit/(loss) before tax
Tax expense
Profit/(loss) for the year attributable to:
Owners of the parent
Non-controlling interest
Earnings per share
Basic earnings per share (in pence)
Diluted earnings per share (in pence)
Other comprehensive income
Reclassification on loss of control of subsidiaries
Available-for-sale financial assets
– Reclassification to profit and loss on sale of available-for-sale investments
– Current year gains/(losses) on remeasurement
Currency translation differences on translation of foreign operations
Other comprehensive income
Total comprehensive income for the year attributable to:
Owners of the parent
Non-controlling interest
Notes
2012
2011
6
7
6
8
9
23
10
21
45,253,431
(31,347,196)
33,147,184
(18,669,898)
13,906,235
1,538,242
(895,006)
(5,458,387)
9,091,084
(4,823,587)
2,808,853
(4,815,135)
14,477,286
2,537,869
(865,832)
(3,666,390)
12,482,933
(2,647,296)
1,326,695
–
2,261,215
(2,044,115)
11,162,332
(2,408,443)
217,100
8,753,889
251,427
(34,327)
6,227,842
2,526,047
217,100
8,753,889
0.072
0.072
2.129
2.093
23
(253,343)
–
255,542
(109,483)
(11,261,421)
185,459
(255,542)
(5,076,545)
(11,368,705)
(5,146,628)
(11,151,605)
3,607,261
(11,035,084)
(116,521)
1,627,114
1,980,147
(11,151,605)
3,607,261
(See accompanying notes to the consolidated financial statements)
The financial statements were authorised for issue by the Board of Directors on 30 June 2012 and were signed on behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
Consolidated Statement of Financial Position
As at 31 March 2012
(All amounts in £, unless otherwise stated)
Particulars
ASSETS
Non-current
Property, plant and equipment
Investments and other assets
Deferred tax asset
Restricted cash
Total non-current assets
Current
Inventories
Trade and other receivables
Cash and cash equivalents
Restricted cash
Current tax assets
Investments and other assets
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Equity attributable to owners of the parent:
Share capital
Share premium
Other components of equity
Retained earnings/(accumulated deficit)
Total
Non-controlling interest
Total equity
Liabilities
Non-current
Borrowings
Trade and other payables
Deferred tax liability
Total non-current liabilities
Current
Borrowings
Trade and other payables
Other liabilities
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
49
Notes
2012
2011
11
12
10
15
14
13
15
15
12
18
19
10
18
19
93,031,022
2,285,430
–
868,996
73,995,296
6,941,814
155,512
1,214,699
96,185,448
82,307,321
5,546,740
17,405,365
37,876,393
3,712,150
48,071
52,836,729
5,605,523
8,576,366
71,104,280
1,080,877
272,105
45,486,243
117,425,448 132,125,394
213,610,896 214,432,715
51,671
51,671
124,316,524 124,316,524
7,803,844
9,050,027
(3,256,411)
10,577,591
131,689,375 141,222,066
9,807,809
62,371
131,751,746 151,029,875
56,055,498
1,396,701
1,300,658
45,254,399
1,231,509
849,446
58,752,857
47,335,354
14,806,900
7,809,652
239,259
250,482
5,064,797
10,716,961
241,112
44,615
23,106,293
16,067,485
81,859,150
63,402,839
213,610,896 214,432,714
(See accompanying notes to the consolidated financial statements)
The financial statements were authorised for issue by the Board of Directors on 30 June 2012 and were signed on behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
50
Consolidated Statement of Changes in Equity
For the year ended 31 March 2012
(All amounts in £, unless otherwise stated)
Group
Balance at 1 April 2011
Transfers during the year
Employee share-based payment options
Effect of loss of control of subsidiaries (refer note 23)
Transactions with owners
Profit for the year from operating activities
Effect of loss of control of subsidiaries (refer note 23)
Currency translation differences
Gains/(losses) on sale/remeasurement of available-for-sale financial assets
Total comprehensive income for the year
Balance at 31 March 2012
Balance at 1 April 2010
Issue of equity shares
Employee share-based payment options
Transactions with owners
Issued capital
(number of shares)
Share capital
Share premium
351,504,795
51,671 124,316,524
351,504,795
51,671 124,316,524
6,116,596
3,189,641
9,050,027 142,724,459
178,892 142,903,351
–
–
–
351,504,795
51,671 124,316,524
286,989,795
64,515,000
42,187
9,484
66,943,323
57,373,201
351,504,795
51,671 124,316,524
Profit for the year
Currency translation differences
Gains/(losses) on sale/remeasurement of available-for-sale financial assets
Total comprehensive income for the year
–
–
–
Balance at 31 March 2011
351,504,795
51,671 124,316,524
4,614,203
3,189,641
9,050,027 141,222,066
9,807,809 151,029,875
(See accompanying notes to the consolidated financial statements)
Other reserves
translation reserve
Retained earnings
parent equity
interest
Total equity
Foreign currency
Total of
Non-controlling
4,614,203
3,189,641
9,050,027 141,222,066
9,807,809 151,029,875
48,146
1,454,247
48,146
1,454,247
(48,146)
(9,580,771)
–
1,454,247
(9,580,771)
(1,281,379)
(248,101)
(11,177,522)
144,354
251,427
1,276,137
251,427
(253,343)
(34,327)
–
217,100
(253,343)
(11,177,522)
(83,899)
(11,261,421)
144,354
1,705
146,059
(1,137,025)
(11,425,623)
1,527,564
(11,035,084)
(116,521)
(11,151,605)
4,979,571
(8,235,982) 10,577,591 131,689,375
62,371 131,751,746
3,228,892
7,721,433
2,822,185
7,827,662
88,585,682
80,758,020
57,382,685
1,454,247
–
–
57,382,685
1,454,247
1,454,247
4,683,139
7,721,433
2,822,185 139,594,952
7,827,662 147,422,614
(4,531,792)
(68,936)
6,227,842
6,227,842
(4,531,792)
(68,936)
2,526,047
(544,753)
(1,147)
8,753,889
(5,076,545)
(70,083)
(68,936)
(4,531,792)
6,227,842
1,627,114
1,980,147
3,607,261
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
Issued capital
(number of shares)
Share capital
Share premium
351,504,795
51,671 124,316,524
Foreign currency
translation reserve
3,189,641
Other reserves
4,614,203
48,146
1,454,247
51
Retained earnings
parent equity
Total of
Non-controlling
interest
Total equity
9,050,027 141,222,066
48,146
1,454,247
(48,146)
9,807,809 151,029,875
–
1,454,247
(9,580,771)
(9,580,771)
351,504,795
51,671 124,316,524
6,116,596
3,189,641
9,050,027 142,724,459
178,892 142,903,351
–
–
–
351,504,795
51,671 124,316,524
286,989,795
64,515,000
42,187
9,484
66,943,323
57,373,201
(1,281,379)
144,354
(248,101)
(11,177,522)
251,427
1,276,137
251,427
(253,343)
(11,177,522)
144,354
(34,327)
–
(83,899)
1,705
217,100
(253,343)
(11,261,421)
146,059
(1,137,025)
(11,425,623)
1,527,564
(11,035,084)
(116,521)
(11,151,605)
4,979,571
(8,235,982) 10,577,591 131,689,375
62,371 131,751,746
3,228,892
7,721,433
2,822,185
1,454,247
80,758,020
57,382,685
1,454,247
7,827,662
–
–
88,585,682
57,382,685
1,454,247
Gains/(losses) on sale/remeasurement of available-for-sale financial assets
Total comprehensive income for the year
–
–
–
(4,531,792)
(68,936)
6,227,842
6,227,842
(4,531,792)
(68,936)
2,526,047
(544,753)
(1,147)
8,753,889
(5,076,545)
(70,083)
(68,936)
(4,531,792)
6,227,842
1,627,114
1,980,147
3,607,261
Balance at 31 March 2011
351,504,795
51,671 124,316,524
4,614,203
3,189,641
9,050,027 141,222,066
9,807,809 151,029,875
351,504,795
51,671 124,316,524
4,683,139
7,721,433
2,822,185 139,594,952
7,827,662 147,422,614
Group
Balance at 1 April 2011
Transfers during the year
Employee share-based payment options
Effect of loss of control of subsidiaries (refer note 23)
Transactions with owners
Profit for the year from operating activities
Effect of loss of control of subsidiaries (refer note 23)
Currency translation differences
Gains/(losses) on sale/remeasurement of available-for-sale financial assets
Total comprehensive income for the year
Balance at 31 March 2012
Balance at 1 April 2010
Issue of equity shares
Employee share-based payment options
Transactions with owners
Profit for the year
Currency translation differences
(See accompanying notes to the consolidated financial statements)
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
52
Consolidated Statement of Cash Flows
For the year ended 31 March 2012
(All amounts in £, unless otherwise stated)
Particulars
Cash flows from operating activities
Profit/(loss) for the year before tax
Foreign exchange loss/(gain)
Financial expenses
Financial income
Share-based compensation costs
Depreciation
Loss on deconsolidation of subsidiaries
Movements in working capital
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other current assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in other liabilities
Cash (used in)/generated from operations
Income taxes paid, net of refunds
Net cash generated by/(used in) operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Finance income
Dividend income
Movement in restricted cash
Sale/(purchase) of investments, net
(Increase)/decrease in land lease deposits
Net cash (used)/generated by investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Refund of application money
Proceeds from borrowings (net)
Interest paid
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year/period
Effect of exchange rate changes on the balance of cash held in foreign currencies
Impact on deconsolidation of subsidiaries (note 23)
Cash and cash equivalents at the end of the year/period
(See accompanying notes to the consolidated financial statements)
2012
2011
2,261,215
130,240
4,823,587
(2,648,309)
1,454,247
1,397,121
4,815,135
11,162,331
(113,052)
2,647,296
(1,326,695)
1,454,247
1,208,461
–
12,233,237
15,032,588
(14,047,319)
(1,579,425)
1,419,697
5,565,387
1,056,506
4,648,082
(532,088)
(5,706,441)
(3,948,601)
(2,048,059)
5,258,094
(2,981,158)
5,719,475
(1,964,628)
4,115,994
3,754,847
(71,351,424)
2,541,533
453,787
(3,013,933)
2,603,909
–
(19,758,114)
782,508
544,187
(931,303)
3,124,948
(2,115,283)
(68,766,128)
(18,353,057)
–
–
37,122,045
(4,823,587)
57,382,685
16,985,286
(2,647,296)
32,298,458
71,720,675
(32,351,676)
57,122,465
71,104,280
(643,204)
(233,008)
14,168,453
(186,638)
–
37,876,393
71,104,280
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
53
Notes to the Consolidated Financial Statements
For the year ended 31 March 2012
(All amounts in £, unless otherwise stated)
1. Corporate information
1.1. Nature of operations
OPG Power Ventures Plc (‘the Company’ or ‘OPGPV’), and its subsidiaries (collectively referred to as ‘the Group’) are primarily engaged in the
development, owning, operation and maintenance of private sector power projects In India. The electricity generated from the Group’s plants is
sold principally to public sector undertakings and heavy industrial companies in India or in the short-term market. The business objective of the
Group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers
and other users under the ‘open access’ provisions mandated by the Government of India.
1.2. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) and its
interpretations as adopted by the European Union (‘EU’) and the provisions of the Isle of Man, Companies Act 2006 applicable to companies
reporting under IFRS.
1.3. General information
OPG Power Ventures Plc, a limited liability corporation, is the Group’s ultimate parent company and is incorporated and domiciled in the Isle of
Man. The address of the Company’s registered office, which is also the principal place of business, is IOMA House, Hope Street, Douglas, Isle
of Man IM1 1JA. The Company’s equity shares are listed on the Alternative Investment Market (‘AIM’) of the London Stock Exchange.
The financial statements were approved by the Board of Directors on 30 June 2012.
2. Changes in accounting policies
The Group has adopted the following revisions and amendments to IAS 24 – Related Party Disclosures issued by the International Accounting
Standards Board, which is relevant to and effective for the Group’s financial statements for the annual period beginning 1 April 2011.
IAS 24 R introduced changes with respect to the definition of a related party which has been clarified to ensure all the relevant information is still
being captured. The Group has already identified the related parties in a similar manner as suggested by the revised standard. Hence there
was no impact on these financial statements.
2.1 Standards, amendments and interpretations to existing standards that are not effective and have not been adopted early by the Group
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have
been published but are not yet effective, and have not been adopted early by the Group.
Management anticipates that all of the relevant pronouncements will be adopted in the Group’s accounting policies for the first period
beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to
be relevant to the Group’s financial statements is provided below. Certain other new standards and interpretations have been issued but are
not expected to have a material impact on the Group’s financial statements.
Standards and interpretations adopted by the EU as at 31 March 2012:
Standard or interpretation
IFRS 9: Financial Instruments – Recognition and Measurement
IFRS 10: Consolidated Financial Statements
IFRS 11: Joint Arrangements
IFRS 12: Disclosure of Interests in Other Entities
IFRS 13: Fair Value Measurement
IAS 1 Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)
IAS 12 Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)
IAS 19: Employee Benefits (Revised 2011)
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
Effective for reporting periods
starting on or after
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 July 2012
1 January 2012
1 January 2013
1 January 2013
1 January 2013
The management is yet to assess the impact of IFRS 9 on the Group’s consolidated financial statements. However they do not expect to
implement IFRS 9 until all of its chapters have been published and they can comprehensively assess the impact of all changes.
The management does not expect the application of the other standards to have any material impact on its financial statements when those
standards become effective. The Group does not intend to apply any of these pronouncements early.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 54
3. Summary of significant accounting policies
3.1 Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for financial assets and liabilities at fair value
through profit or loss and available-for-sale financial assets measured at fair value. The financial statements have been prepared on a going
concern basis.
The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007) and have
been presented in Great Britain Pound (£), which is the functional and presentation currency of the Company.
3.2. Basis of consolidation
The consolidated financial statements incorporate the financial information of OPG Power Ventures Plc and its subsidiaries for the year ended
31 March 2012.
A subsidiary is defined as an entity controlled by the Company. Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are fully consolidated from the date of
acquisition, being the date on which control is acquired by the Group, and continue to be consolidated until the date that such control
ceases. All subsidiaries have a reporting date of 31 March and use consistent accounting policies adopted by the Group.
All intra-Group balances, income and expenses and any resulting unrealised gains arising from intra-Group transactions are eliminated in full
on consolidation.
Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in
the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from
parent shareholders’ equity. Acquisitions of additional stake or dilution of stake from/to minority interests in the Group where there is no loss
of control are accounted for as equity transaction, whereby, the difference between the consideration paid or received and the book value of
the share of the net assets is recognised in ‘other reserve/retained earnings’ within statement of changes in equity.
The practice of presenting stand alone accounts of the Company has been dispensed with, effective this reporting period, given that the
Company is principally a holding Company with no independent business income of its own and that the principal earnings of the Group are
derived from its subsidiaries in India.
3.3. List of subsidiaries
Details of the Group’s subsidiaries which are consolidated into the Group’s consolidated financial statement, are as follows:
Subsidiaries
Caromia Holdings limited (‘CHL’)
Gita Energy Private Limited (‘GEPL’)
(refer note below)
Gita Holdings Private Limited (‘GHPL’)1
OPG Power Generation Private Limited
(‘OPGPG’)
OPG Power Gujarat Private Limited
(‘OPGG’)2
OPG Renewable Energy Private Limited
(‘OPGRE’)3
OPG Energy Private Limited (‘OPGE’)3
Gita Power and Infrastructure Private Limited
(‘GPIPL’)
Immediate parent
OPGPV
CHL
CHL
GEPL and
GHPL
GEPL and
GHPL
GEPL and
GHPL
OPGPG
GHPL
Country of
incorporation
Cyprus
Cyprus
Cyprus
India
India
India
India
India
% Voting right
% Economic interest
2012
100
100
100
71.76
100
0
0
100
2011
100
100
100
71.76
65.90
22
29.78
100
2012
100
100
100
99
100
33
2011
100
100
100
99
99
33
44.22
98.22
44.22
97.91
1 As of 10 February 2011 pursuant to agreement for assignment of debt between CHL and OPGPV the entire shares held in GEPL and GHPL have been transferred by ‘OPGPV’ to ‘CHL’.
2 Partly paid equity shares in OPGG have been forfeited and thereby the economic interest and voting rights of the GEPL and GHPL together stand increased to 100%.
3 Refer note 23 for deconsolidation of these subsidiaries.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 55
3. Summary of significant accounting policies continued
3.4. Foreign currency translation
The functional currency of the Company is the Great Britain Pound Sterling (£). The Cypriot entities are an extension of the parent and pass
through investment entities. Accordingly the functional currency of the subsidiaries in Cyprus is the Great Britain Pound Sterling. The functional
currency of the Company’s subsidiaries operating in India, determined based on evaluation of the individual and collective economic factors is
Indian Rupees (INR). The presentation currency of the Group is the Great Britain Pound (£) as submitted to the AIM counter of the London
Stock Exchange where the shares of the Company are listed.
At the reporting date the assets and liabilities of the Group are translated into the presentation currency which is Great Britain Pound Sterling (£)
at the rate of exchange ruling at the statement of financial position date and the statement of comprehensive income is translated at the
average exchange rate for the year. Exchange differences are charged/credited to other comprehensive income and recognised in the currency
translation reserve in equity.
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the statement of financial position date are translated into functional currency at the foreign exchange rate
ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in general and administrative expenses within the
profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value
are translated to functional currency at foreign exchange rates ruling at the dates the fair value was determined.
The Great Britain Pound (£):Indian Rupee (INR) exchange rates used to translate the INR financial information into the presentation currency of
Great Britain Pound (£) were as follows:
Particulars
Closing rate at 31 March
Average rate for the year ended 31 March
Closing rate at 30 November
Average rate for the period ended 30 November
2011–12
82.90
76.69
81.16
74.92
2010–11
72.60
70.96
–
–
3.5. Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group, and
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable in accordance with the
relevant agreements, net of discounts, rebates and other applicable taxes and duties.
Sale of electricity
Revenue comprises revenue from sale of electricity. Revenue from the sale of electricity is recognised when earned on the basis of contractual
arrangement with the customers and reflects the value of units supplied including an estimated value of units supplied to the customers
between the date of their last meter reading and the reporting date.
Interest and dividend
Revenue from interest is recognised as interest accrues (using the effective interest rate method). Revenue from dividends is recognised when
the right to receive the payment is established.
3.6. Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or
directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or
prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the
financial statements.
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 56
3. Summary of significant accounting policies continued
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or
liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences
associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. For
management’s assessment of the probability of future taxable income to utilise against deferred tax assets. Deferred tax assets and liabilities
are offset only when the Group has a right and the intention to set off current tax assets and liabilities from the same taxation authority.
Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate
to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in
other comprehensive income or equity, respectively.
3.7. Financial instruments
Financial assets and financial liabilities are measured initially at fair value adjusted by transactions costs, except for financial assets and financial
liabilities carried at fair value through profit or loss, which are measured initially at fair value.
Financial assets and financial liabilities are measured subsequently as described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and
all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
3.8. Financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:
– loans and receivables; and
– available-for-sale financial assets.
The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other
comprehensive income.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After
initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is
omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this
category of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a
specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which
are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss
estimate is then based on recent historical counterparty default rates for each identified group.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in
any of the other categories of financial assets. The Group’s available-for-sale financial assets include mutual funds, listed securities and equity
instruments. Available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and
reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets,
which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in
other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other
comprehensive income.
Reversals of impairment losses are recognised in other comprehensive income, except for financial assets that are debt securities which are
recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 57
3. Summary of significant accounting policies continued
3.9. Financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables. Financial liabilities are measured subsequently at amortised cost
using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried
subsequently at fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within ‘finance
costs’ or ‘finance income’.
3.10. Fair value of financial instruments
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid
prices at the close of business on the statement of financial position date. For financial instruments where there is no active market, fair value is
determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current
fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.
3.11. Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and/or impairment losses, if any. The cost includes
expenditures that are directly attributable to property, plant and equipment such as employee cost, borrowing costs for long-term construction
projects etc, if recognition criteria are met. Likewise, when a major inspection is performed, its costs are recognised in the carrying amount of
the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in the
profit or loss as incurred.
The present value of the expected costs of decommissioning of the asset after its use is included in the costs of the respective asset, if the
recognition of the criteria for a provision is met.
Land is not depreciated. Depreciation on other assets is computed on straight-line basis over the useful life of the asset based on
management’s estimate as follows:
Nature of asset
Buildings
Power stations
Other plant and equipment
Vehicles
Useful life (years)
30–40
15–40
3–10
5–11
Assets in the course of construction are stated at cost and not depreciated until commissioned.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised.
The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively
if appropriate.
3.11. Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date whether
fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Group as a lessee
Contracts to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the
Group. Leases where the Group does not acquire substantially all the risks and benefits of ownership of the asset are classified as operating leases.
Operating lease payments are recognised as an expense in the profit or loss on a straight-line basis over the lease term. Lease of land is
classified separately and is amortised over the period of lease.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 58
3. Summary of significant accounting policies continued
3.12. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial period
of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary investment
of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.
Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated as
borrowing costs and are charged to profit or loss.
All other borrowing costs including transaction costs are recognised in the profit or loss in the period in which they are incurred, the amount
being determined using the effective interest rate method.
3.13. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when
annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or cash-generating unit’s (‘CGU’) fair value less costs to sell and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell,
an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded
subsidiaries or other available fair value indicators.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGU recoverable
amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s
recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at the revalued
amount, in which case the reversal is treated as a revaluation increase.
3.14. Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits, net of restricted
cash and outstanding bank overdrafts.
3.15. Inventories
Inventories are stated at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition is accounted based on weighted average price.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.
3.16. Earnings per share
The earnings considered in ascertaining the Group’s earnings per share (‘EPS’) comprise the net profit for the year attributable to ordinary
equity holders of the parent. The number of shares used for computing the basic EPS is the weighted average number of shares outstanding
during the year.
3.17. Other provisions and contingent liabilities
Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the
Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the
presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or
onerous contracts. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and
implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future
operating losses.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 59
3. Summary of significant accounting policies continued
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at
the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations,
the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are
discounted to their present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate
asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted
to reflect the current best estimate.
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no
liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities are
recognised on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured reliably,
even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable provision as
described above and the amount recognised on the acquisition date, less any amortisation.
3.18. Share-based payments
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans feature any options for a
cash settlement.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are
rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the
equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for
example profitability and sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to ‘other reserves’.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to
vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to
any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares
issued are allocated to share capital with any excess being recorded as share premium.
3.19. Employee benefits
Gratuity
In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering eligible
employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of
employment, of an amount based on the respective employee’s salary and the tenure of employment.
Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each statement of
financial position date using the projected unit credit method.
The Group recognises the net obligation of a defined benefit plan in its statement of financial position as an asset or liability, respectively in
accordance with IAS 19, Employee benefits. The discount rate is based on the Government securities yield. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss in the statement of comprehensive
income in the period in which they arise.
Employees Benefit Trust
Effective during the year, the Group has established an Employees Benefit Trust (‘EBT’) for investments in the Company’s shares for employee
benefit schemes. IOMA Fiduciary in the Isle of Man have been appointed as Trustees of the EBT with full discretion invested in the Trustee,
independent of the Company, in the matter of share purchases. As at present, no investments have been made by the Trustee nor any funds
advanced by the Company to the EBT. The Company is yet to formulate any employee benefit schemes or to make awards thereunder.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 60
3. Summary of significant accounting policies continued
3.20. Business combinations
Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are
accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that
common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying amounts
recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of equity of the acquired
entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.
4. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of a
number of these policies requires the Group to use a variety of estimation techniques and apply judgement to best reflect the substance of
underlying transactions.
The Group has determined that a number of its accounting policies can be considered significant, in terms of the management judgement that
has been required to determine the various assumptions underpinning their application in the consolidated financial statements presented
which, under different conditions, could lead to material differences in these statements.
The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on
the financial statements.
– Deferred tax assets:
The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest
approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused
tax loss or credit. The tax rules in India in which the Group operates are also carefully taken into consideration. If a positive forecast of
taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax
asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is
assessed individually by management based on the specific facts and circumstances.
Estimates and uncertainties
When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about recognition and
measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made
by management, and will seldom equal the estimated results. Information about significant judgements, estimates and assumptions that have
the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below.
The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that
have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are
discussed below:
– Recoverability of deferred tax assets: The recognition of deferred tax assets requires assessment of future taxable profit (see note 3.6).
– Estimation of fair value of acquired financial assets and financial liabilities: While preparing the financial statements the Group makes
estimates and assumptions that affect the reported amount of financial assets and financial liabilities.
• Other financial liabilities:
Borrowings held by the Group are measured at amortised cost except where designated at fair value through profit or loss. Further,
liabilities associated with financial guarantee contracts in the financial statements are initially measured at fair value and remeasured at
each statement of financial position date (see note 3.9 and note 18).
– Impairment tests: The determination of recoverable amounts of the CGUs assessed in the annual impairment test requires the Group to
estimate of their fair value net of disposal costs as well as their value in use. The assessment of value in use requires assumptions to be
made with respect to the operating cash flows of the CGUs as well as the discount rates.
– Useful life of depreciable assets: Management reviews the useful lives of depreciable assets at each reporting date, based on the expected
utility of the assets to the Group.
– Provisions: The Group has currently provided for electricity tax based on demand received from the concerned authorities (see note 6a).
– Uncollectability of trade receivables: Analysis of historical payment patterns, customer concentrations, customer credit-worthiness and
current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required (see note 13).
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 61
5. Segment information
The Group has adopted the ‘management approach’ in identifying the operating segments as outlined in IFRS 8. Operating segments are
reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker,
who is responsible for allocating resources and assessing performance of the operating segment has been identified as the steering committee
that makes strategic decisions. Management has analysed the information that the chief operating decision maker reviews and concluded on
the segment disclosure. In identifying its operating segments, management generally follows the Group’s service lines, which represent the
generation of the power and other related services provided by the Group. The activities undertaken by the power generation segment
includes sale of power and other related services. The accounting policies used by the Group for segment reporting are the same as those
used for consolidated financial statements.
For management purposes, the Group is organised into only a single business unit of power generation and distribution of the same to
customers. There are no geographical segments as all revenues arise from India.
Revenue on account of sale of power to one party amounts to £22,237,514 (2010: £25,790,162).
6. Depreciation, costs of inventories and employee benefit expenses included in the consolidated statements of
comprehensive income
a) Depreciation and costs of inventories included in the consolidated statements of comprehensive income:
Included in cost of revenue:
Cost of fuel consumed
Depreciation
Other direct costs
Total
2012
2011
19,011,365
1,313,202
11,022,629
14,931,913
1,145,380
2,592,605
31,347,196
18,669,898
Other direct costs include electricity tax provided/paid during the year amounting to £928,336 (2011: £nil). Depreciation included general and
administrative expenses amounting to £83,919 (2011: £63,081).
b) Employee benefit expenses forming part of general and administrative expenses are as follows:
Salaries and wages
Employee benefit costs
Employee stock option
Total
2012
2011
1,073,043
117,529
1,454,247
781,534
60,083
1,454,247
2,644,819
2,295,864
c) Auditor’s remuneration for audit services amounting to £45,000 (2011: £38,900) is included in general and administrative expenses.
d) Foreign exchange (loss)/gain included in the general and administrative expenses/other income is as follows:
Foreign exchange (loss)/gain
Total
7. Other income
a) Other income comprises of:
Sale of coal
Interest on overdue receivables
Compensation for loss of profit
Miscellaneous income/expense
Total
2012
2011
(130,240)
(130,240)
113,052
113,052
2012
2011
–
563,902
370,277
604,063
206,203
–
1,888,294
443,372
1,538,242
2,537,869
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 62
7. Other income continued
The item ‘compensation for loss of profit’ consists of £370,277, due to OPGPG, a subsidiary, from the EPC contractor for delay in guaranteed
commissioning date of their 77 MW plant, non-achievement of guaranteed performance parameters at the plant and consequent loss of
revenue to OPGPG. This amount represents loss of profits which is reliably measurable as at the reporting date and has been recognised
based on the terms and conditions as specified in the EPC contract and on acceptance of claim by the contractor.
Interest on overdue receivables consists of interest charged to a customer, as per the terms of the agreement on account delay in payment.
Miscellaneous income includes commission receivable of £225,000 (2011: £nil).
8. Finance costs
Finance costs comprises of:
Interest expenses on loans and borrowings
Loss on disposal of financial instruments
Other finance costs
Total
2012
2011
4,068,516
465,546
289,525
2,271,354
255,542
120,400
4,823,587
2,647,296
Interest expenses on loans and borrowings, pertains to interest expenses on financial liability at an amortised cost of £4,068,516 (2011: £2,271,354)
in the consolidated financial statement.
9. Finance income
The finance income comprises of:
Interest income
– Bank deposits
– Loans and receivables
Dividend income
Other finance income
Unwinding of discount on security deposits
Total
2012
2011
460,114
66,072
305,505
1,977,162
–
239,872
162,340
544,187
372,106
8,190
2,808,853
1,326,695
Other finance income includes the income earned by OPGPV on the investment of its funds raised by way of further issue during the previous year.
10. Tax expense/(income)
The major components of income tax expense for the years ended 31 March 2012 and 2011 are as follows:
Consolidated statement of changes in equity: tax reconciliation
Reconciliation between tax expense and the product of accounting profit multiplied by India’s domestic tax rate for the years ended 31 March
2012 and 2011 is as follows:
Accounting profit before taxes
Loss on deconsolidation of subsidiaries
Enacted tax rates
Tax on profit at enacted tax rate
Differences on account MAT rate
Items taxed at zero
Others
Actual tax expense
2012
2011
2,261,215
4,815,135
32.445%
2,295,922
(582,406)
253,998
76,601
11,162,332
–
32.445%
3,621,619
(1,596,807)
417,480
(33,849)
2,044,115
2,408,443
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 63
10. Tax expense/(income) continued
Consolidated statement of comprehensive income
Current tax
Deferred tax
Tax expense reported in the statement of comprehensive income
2012
2011
940,344
1,103,771
2,105,976
302,467
2,044,115
2,408,443
The Company is subject to Isle of Man corporate tax at the standard rate of zero percent. As such, the Company’s tax liability is zero.
Additionally, Isle of Man does not levy tax on capital gains. However, considering that the Company’s operations are entirely based in India, the
effective tax rate of the Group has been computed based on the current tax rates prevailing in India. Further, a substantial portion of the profits
of the Group’s India operations are exempt from Indian income taxes being profits attributable to generation of power in India. Under the tax
holiday the taxpayer can utilise an exemption from income taxes for a period of any 10 consecutive years out of the 15 years from the date of
commencement of operations.
The Group is subject to the provisions of Minimum Alternate Tax (‘MAT’) under the Indian income taxes for the year ended 31 March 2012 and
2011. Accordingly, the Group calculated the tax liability for current taxes in India after considering MAT.
Deferred income tax for the Group at 31 March 2012 and 2011 relates to the following:
Deferred income tax assets
Lease transactions and others
Mark-to-market on available-for-sale financial assets
Gratuity
Total
Deferred income tax liabilities
Difference in depreciation on property, plant and equipment
Mark-to-market on available-for-sale financial assets
Total
Deferred income tax liabilities, net
Movement in temporary differences during the year:
Particulars
As at
1 April 2011
Recognised in
income statement
Property, plant and equipment and others
Lease transactions
Gratuity
Mark-to-market gain/(loss) on available-for-sale financial assets
(849,446)
30,294
–
125,218
(503,561)
18,667
4,571
–
Recognised
in equity
–
–
–
(126,401)
(693,934)
(480,323)
(126,401)
2012
2011
48,961
–
4,571
53,532
30,294
125,218
–
155,512
1,353,007
1,183
849,446
1,354,190
849,446
1,300,658
Translation
adjustment
As at
31 March 2012
–
–
–
–
–
(1,353,007)
48,961
4,571
(1,183)
(1,300,658)
Particulars
As at
1 April 2010
Recognised in
income statement
Recognised
in equity
Translation
adjustment
As at
31 March 2011
Property, plant and equipment and others
Mark-to-market gain/(loss) on available-for-sale financial assets
(514,235)
51,505
(302,467)
(462,730)
(302,467)
–
73,713
73,713
(2,450)
–
(2,450)
(819,152)
125,218
(693,934)
In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the
deferred income tax assets will be realised. The ultimate realisation of deferred income tax assets is dependent upon the generation of future taxable
income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered
realisable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 64
10. Tax expense/(income) continued
Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them. Further,
dividends are not taxable in India in the hands of the recipient. However, the Company will be subject to a ‘dividend distribution tax’ currently at
the rate of 15% (plus applicable surcharge and education cess) on the total amount distributed as dividend.
As at 31 March 2012 and 31 March 2011, there was no recognised deferred tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group’s subsidiaries, the Group has determined that undistributed profits of its subsidiaries will not be distributed in
the foreseeable future.
11. Property, plant and equipment
The property, plant and equipment comprises of:
a) Gross block
Particulars
As at 1 April 2010
– Additions
– Disposals
– Exchange adjustments
As at 31 March 2011
As at 1 April 2011
– Additions
– Deconsolidation (refer note 23)
– Disposals
– Exchange adjustments
As at 31 March 2012
b) Accumulated depreciation
Land and buildings
Power stations
and equipment
Vehicles
Other plant
Assets under
construction
Total
9,428,735
444,197
(53,270)
(614,406)
8,271,204
42,059,353
–
(538,929)
94,894
49,460
–
(6,233)
142,991
71,375
–
(9,318)
47,459,624
9,635,644
(35,578,462)
(3,092,620)
65,397,448
52,260,029
(35,631,732)
(4,261,506)
9,205,256
49,791,628
138,121
205,048
18,424,186
77,764,239
9,205,256
1,064,278
(986,475)
–
(1,202,662)
49,791,628
1,431,849
(9,013,743)
(26,541)
(6,129,605)
8,080,397
36,053,588
138,121
214,938
(58,777)
–
(9,802)
284,480
Other plant
205,048
122,146
–
–
(34,624)
18,424,186
47,521,538
(10,672,839)
–
(5,318,058)
77,764,239
50,354,749
(20,731,834)
(26,541)
(12,694,750)
292,570
49,954,827
94,665,863
Particulars
Land and buildings
Power stations
and equipment
Vehicles
As at 1 April 2010
– Charge for the year
– Disposals
– Exchange adjustments
As at 31 March 2011
As at 1 April 2011
– Charge for the year
– Deconsolidation (refer note 23)
– Disposals
– Exchange adjustments
As at 31 March 2012
207,803
34,166
–
(14,313)
2,478,926
1,111,445
–
(186,610)
227,656
3,403,761
227,656
28,843
(223,623)
–
(26,269)
3,403,761
1,291,215
(2,773,033)
–
(467,030)
6,607
1,454,913
42,383
27,228
–
(3,393)
66,218
66,218
30,870
(24,009)
–
(6,285)
66,794
39,076
35,580
–
(3,350)
71,306
71,306
46,194
–
–
(10,973)
106,527
Assets under
construction
–
–
–
–
–
–
–
–
–
–
–
Total
2,768,188
1,208,419
–
(207,666)
3,768,941
3,768,941
1,397,122
(3,020,665)
–
(510,557)
1,634,841
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 65
11. Property, plant and equipment continued
c) Net block
Particulars
Land and buildings
Power stations
and equipment
Vehicles
Other plant
Assets under
construction
Total
As at 31 March 2012
As at 31 March 2011
8,073,790
8,977,600
34,598,675
46,387,866
217,686
71,902
186,043
133,742
49,954,827
18,424,186
93,031,022
73,995,296
The net book value of land and buildings block comprises of:
Freehold
Buildings
Total
2012
2011
7,440,351
633,439
8,203,467
774,133
8,073,790
8,977,600
Property, plant and equipment with a carrying amount of £42,672,465 (2011: £55,365,466) is subject to security restrictions (refer note 18).
An amount of £3,407,430 (previous year £1,701,620) pertaining to interest on borrowings was capitalised as the funds were deployed for the
construction of qualifying assets.
12. Investments and other assets
a) Current
Available-for-sale financial assets
Prepayments
– Advance to suppliers
– Capital advances
– Other advances
Total
b) Non-current
Available-for-sale financial assets (refer note 23)
Prepayments
Loans and receivables
– Lease deposits
– Other advances
Total
2012
2011
1,393,866
8,851,675
958,668
48,637,313
1,846,882
2,377,033
31,286,228
2,971,307
52,836,729
45,486,243
1,381,762
813,618
–
5,108,701
77,127
12,923
1,065,537
767,576
2,285,430
6,941,814
Available-for-sale financial asset
The current portion of available-for-sale financial asset represents the Group’s investments in mutual fund units. The fair value of the mutual
fund instruments are determined by reference to published data. These mutual fund investments are redeemable on demand.
The non-current portion of available-for-sale financial asset represents the Group’s investments in OPGE and OPGRE, have been fair valued
and the share of the Group has been determined and disclosed as available-for-sale classified under non-current. The management has not
contemplated any sale of these investments and has not explored any options for the disposal of the same.
Prepayments (current)
Advances to suppliers include the amounts paid as advance for supply of fuel to the Group. Other advances of the Group primarily includes
additional import duty on imported coal paid under protest amounting to £754,442 (2011: £211,459). Capital advances comprise of payment
made to EPC contractors for construction of assets and advances paid for purchase of capital equipment. The management expects to realise
these in the next one year.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 66
13. Trade and other receivables
Current
Trade receivables
Unbilled revenues
Other receivables
Total
2012
2011
17,102,878
139,114
163,373
6,518,201
99,425
1,958,740
17,405,365
8,576,366
Trade receivables are generally due within 14 days terms and are therefore short-term and the carrying values are considered a reasonable
approximation of fair value. Out of the above, £17,405,365 (2011: £8,576,366) has been pledged for security as borrowings (refer note 18).
As at 31 March 2012, trade receivables of £60,314 (2011: £nil) were collectively impaired and provided for.
The age analysis of the overdue trade receivables is as follows:
2012
2011
Refer also to note 25 for details of credit risk.
The movement in provision for trade receivables is as follows:
2012
2011
14. Inventories
Coal and fuel
Stores and spares
Total
Past due but not impaired
Total
Neither past due
nor impaired
< 90 days
90–180 days
> 180 days
17,102,878
6,518,201
3,246,760
5,376,841
6,739,233
392,754
6,517,222
142,336
599,663
606,270
Opening balance
–
–
Provision
for the year
60,314
–
Reversal of
provision
Closing balance
–
–
60,314
–
2012
2011
5,068,904
477,836
5,368,042
237,481
5,546,740
5,605,523
2012
2011
34,023,639
3,852,754
69,884,386
1,219,894
37,876,393
71,104,280
Out of the above, £5,546,740 (2011: £4,708,191) has been pledged for security as borrowings (refer note 18).
15. Cash and cash equivalents
Cash and short-term deposits comprise of the following:
Cash at banks and on hand
Short-term deposits
Total
Short-term deposits are made for varying periods, depending on the immediate cash requirements of the Group. They are recoverable
on demand.
Restricted cash represents deposits maturing between 3 to 12 months amounting to £3,712,150 (2011: £1,080,877) and maturing after 12
months amounting to £868,996 (2011: £1,214,699) which have been pledged by the Group in order to fulfil collateral requirements (refer note
18).
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 67
16. Issued share capital
Share capital
The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of
ordinary shares, as reflected in the records of the Group on the date of the shareholders’ meeting, has one vote in respect of each share held.
All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Group.
The Company has an authorised and issued share capital of 351,504,795 equity shares (2011: 351,504,795) at par value of £0.000147
(2011: £0.000147) per share amounting to £51,671 (2011: £51,671).
The Company has issued share capital at par value of £51,671 (£0.000147 per share).
Reserves
Share premium represents the amount received by the Group over and above the par value of shares issued and the excess of the fair value of
share issued in business combination over the par value of such shares. Any transaction costs associated with the issuing of shares are
deducted from securities premium, net of any related income tax benefits.
Translation reserve is used to record the exchange differences arising from the translation of the financial statements of the foreign subsidiaries.
Other reserves represent the difference between the consideration paid and the adjustment to net assets on change of controlling interest,
without change in control. Other reserves also include any costs related with share options granted and gain/losses on remeasurement of
available-for-sale financial assets.
Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income less dividend distribution.
17. Share-based payments
The Board has granted share options to Directors and nominees of Directors which are limited to 10% of the Group’s share capital. Once
granted, the share must be exercised within 10 years of the date of grant otherwise the options would lapse.
The vesting conditions are as follows:
– The 300 MW power plant of Kutch in the state of Gujarat must have been in commercial operation for three months.
– The closing share price being at least £1.00 for three consecutive business days.
The related expense has been amortised over the estimated vesting period of 4.21 years (expected completion of the Kutch plant) and an
expense amounting to £1,454,247 (2011: £1,454,247) was recognised in the profit or loss with a corresponding credit to other reserves.
Movement in the number of share options outstanding and their related weighted average exercise price are as follows:
Particulars
At 1 April
Granted
Forfeited
Exercised
Expired
At 31 March
2012
2011
22,524,234
–
–
–
–
22,524,234
–
–
–
–
22,524,234
22,524,234
Assumptions on valuation of options
The weighted average price fair value of options granted during the previous period, determined using the Black-Scholes valuation model, was
£0.28 per option. The significant inputs into the model were weighted average share price of £0.66 (2011) at the grant date, exercise price
shown above, volatility of £0.60 (2011: £0.60), nil dividend yield (2011: nil), an expected option life of 4.21 years (2011: 4.21 years) and annual
risk free rate of 3%. The volatility measured at the standard deviation of continuously compounded share returns is based on daily share prices
of the last three years.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
68
18. Borrowings
The Borrowings comprise of the following:
Long-term loans
Short-term loans
Cash credit and working capital arrangements
LC bills discounting and buyers’ credit facility
Total
Interest rate
(range %)
Final maturity
2012
2011
12.30–14.62 March 2023
12.30–14.62 March 2013
March 2013
56,055,498
2,908,457
3,311,968
8,586,475
45,254,399
3,367,529
1,294,930
402,338
70,862,398
50,319,196
Total debt of £70,862,398 (2011: £50,319,196) is secured as follows:
– Financial liabilities are measured at amortised cost of the Group.
– The long-term loans taken by the Group are fully secured on the property, plant and other movable current assets of subsidiaries which
have availed such loans. All the loans are personally guaranteed by a Director.
– The short-term loan and cash credits taken by the Group are secured against hypothecation of current assets and in certain cases by
deposits and margin money as collateral.
– LC bills discounting and buyers’ credit facility is fully secured by hypothecation of current assets and in certain cases by margin money
deposits and other fixed deposits of the respective entities availing the facility.
Long-term ‘project finance’ loans contain certain restrictive covenants stipulated by the facility providers and primarily require the Group to maintain
specified levels of certain financial metrics and operating results. The terms of the other borrowings arrangements also contain certain restrictive
covenants primarily requiring the Group to maintain certain financial metrics. As of 31 March 2012, the Group has met all the relevant covenants.
The fair value of borrowings at 31 March 2012 was £70,862,398 (2011: £50,319,196). The fair values have been calculated by discounting
cash flows at prevailing interest rates.
The borrowings mature as follows:
Current liabilities
Amounts falling due within one year
Non-current liabilities
Amounts falling due after one year but not more than five years
Amounts falling due in more than five years
Total
19. Trade and other payables
Current
Trade payables
Creditors for capital goods
Other payables
Total
Non-current
Trade payables
Total
2012
2011
14,806,900
5,064,797
37,336,198
18,719,300
24,694,855
20,559,544
70,862,398
50,319,196
2012
2011
7,229,514
434,913
145,225
9,499,104
314,977
902,880
7,809,652
10,716,961
1,396,701
1,231,509
1,396,701
1,231,509
With the exception of certain trade payables, all amounts are short-term.
– Trade payables are non-interest bearing and are normally settled on 45 days terms.
– Creditors for capital goods are non-interest bearing and are usually settled within a year.
– Other payables include provision for gratuity and other provision for expenses.
– Non-current trade payables comprises retention money which will be settled after completion and successful installation of the projects.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 69
Nature of relationship
Ultimate parent
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary up to 30 November 2011
Subsidiary up to 30 November 2011
Subsidiary
Nature of relationship
Chief Executive Officer
Chief Financial Officer
Chairman
Director
Director
Director
20. Related party transactions
Where control exists
Name of the party
Gita Investments Limited
Caromia Holdings Limited
Gita Energy Private Limited
Gita Holdings Private Limited
OPG Power Generation Private Limited
OPG Power Gujarat Private Limited
OPG Renewable Energy Private Limited
OPG Energy Private Limited
Gita Power and Infrastructure Private Limited
Key management personnel
Name of the personnel
Arvind Gupta
V Narayan Swami
Munish Gupta
Martin Gatto
Ravi Gupta
Michael Grasby
Related parties with whom the Group had transactions during the period
Name of the related party
Nature of relationship
Sri Hari Vallabha Enterprises & Investments (P) Limited
Dhanvarsha Enterprises & Investments Private Limited
Goodfaith Vinmay (P) Limited
Salem Food Products Limited
Sri Rukmani Rolling Mill Private Limited
Kanishk Steel Industries Limited
Gita Energy & Generation Private Limited
Powerserve Support Limited
Gita Devi
Rajesh Gupta
Ravi Gupta
Avantika Gupta
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Entity over which key management personnel exercises control/significant
influence through relatives
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Relative of key management personnel
Relative of key management personnel
Relative of key management personnel
Relative of key management personnel
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 70
20. Related party transactions continued
Name of the party
Summary of transactions with related parties
Kanishk Steel Industries Limited
a) Sharing of power
b) Cost of power generated
c) Lease deposit
d) Lease rent paid
e) Reimbursement of expenses
f) Sale of coal
g) Purchase of raw material
Salem Food Products Limited
a) Sharing of power
b) Interest received
Sri Rukmani Rolling Mill Private Limited
a) Sharing of power
b) Sale of coal
Gita Devi
a) Rent paid
b) Reimbursement of expenses
Avantika Gupta
a) Remuneration
Gita Energy & Generation Private Limited
a) Advance paid
b) Reimbursement of expenses
Powerserve Support Limited
a) Consultancy fees
OPG Renewable Energy Private Limited
a) Sale of coal
Name of the party
Summary of balances with related parties
Salem Food Products Limited
a) Loan outstanding
b) Trade and other receivables
Kanishk Steel Industries Limited
a) Trade and other receivables
b) Lease deposit outstanding
Sri Rukmani Rolling Mill Private Limited
a) Trade and other receivables
OPG Renewable Energy Private Limited
a) Trade and other receivables
2012
2011
692,091
–
–
–
–
310,104
5,616
–
54,123
–
–
–
–
495,323
24,607
1,308,553
148,478
10,851
–
–
23,757
66,130
35,469
1,889
–
1,043
32,036
25,367
–
1,076
2,403,604
–
31,863
21,338
–
–
2012
2011
–
–
759,494
–
286,872
–
331,769
4,611,201
7,197
28,028
224,527
–
Outstanding balances at the year-end are unsecured and interest-bearing in case of loans that are repayable on demand. The interest rates
charged closely approximate to the market rates. There have been no guarantees provided or received for any related party receivables or
payables. For the year ended 31 March 2012, the Group has not recorded any impairment of receivables relating to amounts owed by related
parties (2011: £nil). This assessment is undertaken each financial year through examining the financial position of the related party and the
market in which the related party operates.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 71
21. Earnings per share
Both the basic and diluted EPS have been calculated using the profit attributable to shareholders of the parent company as the numerator (no
adjustments to profit were necessary in 2011 or 2012).
The weighted average number of shares for the purposes of diluted EPS can be reconciled to the weighted average number of ordinary shares
used in the calculation of basic EPS as follows:
Particulars
Weighted average number of shares used in basic EPS
Shares deemed to be issued for no consideration in respect of share-based payments
Weighted average number of shares used in diluted EPS
2012
2011
351,504,795 292,469,151
5,104,499
638,339
352,143,134 297,573,650
22. Director’s remuneration/key management personnel
Name of Directors
Arvind Gupta
V Narayan Swami
Martin Gatto
Michael Grasby
Munish Gupta
Ravi Gupta
Total
2012
2011
156,474
46,942
25,000
25,000
25,000
25,000
303,416
169,109
50,734
25,000
25,000
25,000
25,000
319,843
The above amounts relate to short-term benefits. There are no long-term benefits and termination benefits which are payable to the key
management personnel.
23. Loss on deconsolidation of subsidiaries
In the previous year, pursuant to the voting rights agreement entered by GEPL with Tamil Nadu Property Developers Limited (‘TNPDL’) and
Salem Food Products Limited (‘SFPL’) and OPGPG with Sonal Vyapar Limited (‘SVL’) and TNPDL (hereinafter TNPDL, SFPL and SVL are
collectively referred as ‘Investors’) dated 12 May 2008 and 26 April 2008 respectively, the Investors agreed that in consideration of GEPL
agreeing to subscribe for shares in OPGRE and OPGPG agreeing to subscribe for shares in OPGE, the Investors will exercise all voting rights in
accordance of the directions of GEPL and OPGPG. The total voting rights held by the Investors in OPGRE and OPGE amount respectively to
45% and 21.59%. Further the Investors had also appointed GEPL and OPGPG as the lawful attorneys to exercise their voting rights. Therefore
the combination of the directly held interests together with the Investors voting with the Group had the effect that the Group controlled a
majority of voting rights in OPGRE and OPGE. Accordingly these companies were considered to be subsidiaries of the Group until the expiry of
the agreement on 30 November 2011.
The management determined not to exercise control over the operations of OPGRE and OPGE beyond that date and has, pursuant to a voting
rights agreement entered on 1 December 2011 by GEPL, GHPL and OPGPG (hereinafter referred as ‘Shareholders’) with TNPDL, the
Shareholders have agreed to exercise their voting rights in accordance with the directions of TNPDL in the context of the expiry of the voting
rights hitherto available from the Investors. The Shareholders have thus extended voting support to TNPDL to provide for appropriate
management of the Company. Also, the Group withdrew its nominees from the offices held in the respective companies effective 1 December
2011. There was no consideration that was received and these events resulted in loss of control and significant influence over OPGRE and
OPGE and effective 1 December 2011, the Group’s interests in the said companies are being accounted as investments.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 72
23. Loss on deconsolidation of subsidiaries continued
Accordingly, the Group has derecognised the carrying value of assets, liabilities and non-controlling interest of the former subsidiaries and has
recognised the fair value of the retained investments at the date when control is lost. Further, the Group has reclassified to profit and loss, such
amounts pertaining to these erstwhile subsidiaries that were earlier recognised through other comprehensive income and has accounted for
the resulting difference as loss attributable to the Group. At the date of loss of control, the carrying amount of the subsidiaries’ net assets, the
fair valuation and the resultant impact on the loss of control are as follows:
Particulars
Fair value as certified by independent valuers
Consideration received
Fair value of retained non-controlling investment
Total (A)
Total assets
Total liabilities
Net worth
Non-controlling interest on date of loss of control
Net assets attributable to the Group (B)
OPGRE
OPGE
Total
–
–
–
–
3,124,744
3,124,744
–
1,381,762
–
1,381,762
1,381,762
1,381,762
7,520,744
5,671,332
32,183,730
18,002,130
39,704,474
23,673,462
1,849,412
(1,253,311)
14,181,600
(8,327,461)
16,031,012
(9,580,772)
596,101
5,854,139
6,450,240
Adjustment required to carrying value on deconsolidation (B–A)
596,101
4,472,377
5,068,478
Recycle from other comprehensive income
Revaluation reserve
Translation reserve
Net charge on disposal effecting the Group
(2,076)
(20,599)
(3,166)
(227,502)
(5,242)
(248,101)
573,426
4,241,709
4,815,135
Further the negative goodwill arising from the original investment which was recognised in equity at the time of acquisition has been dealt with
under equity.
Effect of disposal on the statement of cash flows of the Group:
Particulars
Property, plant and equipment, net
Investment and other assets (non-current)
Deferred tax asset
Restricted cash
Investment and other assets (current)
Trade and other receivables
Inventories
Current tax assets, net
Borrowings
Deferred tax liabilities
Accounts payable
Current tax liabilities, net
Other liabilities
Net assets
Equity
Consideration received
Cash and cash equivalents disposed off
Net cash outflow
Total
7,011,772
9,249,940
96,139
221,004
7,829,566
3,171,602
842,089
30,894
(7,396,057)
(484,831)
(1,380,839)
(6,421)
(4,987,310)
14,197,548
14,430,556
–
233,008
233,008
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 73
24. Commitments and contingencies
Operating lease commitments
The Group leases land under operating leases. The leases typically run for a period of 15 to 30 years, with an option to renew the lease after
that date. None of the leases include contingent rentals.
Non-cancellable operating lease rentals are payable as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Total
2012
2011
33,304
133,215
647,098
339,703
1,358,810
2,813,221
813,617
4,511,734
During the year ended 31 March 2012, £36,001 (2011: £339,703) was recognised as an expense in the statement of comprehensive income
in respect of operating leases.
Capital commitments
During the year ended 31 March 2012, the Group entered into a contract to purchase property, plant and equipment for £100,485,417
(2011: £92,009,451).
Guarantees
a) Letter of credit and bank guarantee provided by the banker on behalf of the Group are as disclosed below:
Particulars
Letter of credit
Bank guarantee
As at
31 March 2012
As at
31 March 2011
3,837,061
4,597,552
9,185,515
3,293,417
25. Financial risk management objectives and policies
The Group’s principal financial liabilities, comprises of loans and borrowings, trade and other payables, and other current liabilities. The main
purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has loans and receivables, trade and other
receivables, and cash and short-term deposits that arise directly from its operations. The Group also holds available-for-sale investments.
The Group is exposed to market risk, credit risk and liquidity risk.
The Group’s senior management oversees the management of these risks. The Group’s senior management advises on financial risks and the
appropriate financial risk governance framework for the Group.
The Board of Directors review and agree on policies for managing each of these risks which are summarised below:
Market risk
Market risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market
prices comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity risk. Financial instruments affected by
market risk include loans and borrowings, deposits and available-for-sale investments.
The sensitivity analysis in the following sections relate to the position as at 31 March 2012 and 31 March 2011.
The following assumption has been made in calculating the sensitivity analysis:
– The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on the net interest income
for one year, based on the floating rate of borrowings held at 31 March 2012, all other variables being held constant. These changes are
considered to be reasonably possible based on observation of current market conditions.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 74
25. Financial risk management objectives and policies continued
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with
floating interest rates.
At 31 March 2012 and 31 March 2011, the Group had no interest rate derivatives.
If interest rates increase or decrease by 100 basis points with all other variables being constant, the Group’s profit after tax for the year ended
31 March 2012 would decrease or increase by £243,249 (2011: £143,355). Increase/decrease in interest rates would have the same impact
on the Group’s equity.
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market equity rates. The
Group’s exposure to the risk of changes in market equity prices relates primarily to the Group’s available-for-sale investments. The analysis is
based on the assumption that the equity indexes had increased by 10% with all other variables held constant and all the entity’s equity
instruments moved according to the historical correlation with the index. The maximum impact of increases in the investment on the entity’s
post-tax profit for the year is £139,387 (2011: £885,168).
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rate. The Group’s presentation currency is the Great Britain Pound (£). A majority of the Group’s assets are located in India where the
Indian Rupee is the functional currency for its subsidiaries. Currency exposures also exist in the nature of capital expenditure and services
denominated in currencies other than the Indian Rupee.
Set out below is the impact of a 10% change in the US Dollar on profit arising as a result of the revaluation of the Group’s foreign currency
financial instruments:
Currency
United States Dollar (USD)
As at 31 March 2012
As at 31 March 2011
Effect of 10%
strengthening of
£ on net earnings
Closing rate
Effect of 10%
strengthening of
£ on net earnings
Closing rate
50.88
(847,894)
45.29
(742,124)
The impact on total equity is the same as the impact on net earnings as disclosed above.
Credit risk analysis
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.
The Group is exposed to credit risk from its operating activities (primarily for trade and other receivables) and from its financing activities,
including short-term deposits with banks and financial institutions, and other financial assets.
The maximum exposure for credit risk at the reporting date is the carrying value of each class of financial assets amounting to £63,452,199
(2011: £97,769,710).
The Group’s substantial supply of power is to the electricity departments of the government, where the Group has assessed the credit risk as low
and the Group has contractual rights to charge interest on overdue receivables. However, the Group has exposure to credit risk from a limited
customer group. The Group ensures concentration of credit does not significantly impair the financial assets since the customers to whom the
exposure of credit is taken are well established and reputed industries engaged in their respective field of business. The credit worthiness of
customers to which the Group grants credit in the normal course of the business is monitored regularly. The credit risk for liquid funds and
other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
The Group’s maximum exposure for financial guarantees is noted in note 24.
The Group’s management believes that all the above financial assets, except as mentioned in note 12 and 13, are not impaired for each of the
reporting dates under review and are of good credit quality.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 75
25. Financial risk management objectives and policies continued
Liquidity risk analysis
The Group’s main source of liquidity is its operating businesses. The treasury department uses regular forecasts of operational cash flow,
investment and trading collateral requirements to ensure that sufficient liquid cash balances are available to service ongoing business
requirements. The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as
well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis,
as well as on the basis of a rolling 90-day projection. Long-term liquidity needs for a 90-day and a 30-day lookout period are identified monthly.
The Group maintains cash and marketable securities to meet its liquidity requirements for up to 60-day periods. Funding for long-term liquidity
needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The following is an analysis of the Group contractual undiscounted cash flows payable under financial liabilities at 31 March 2012:
Borrowings
Trade and other payables
Other current liabilities
Total
Current
Non-current
On demand
Within 12 months
1–5 years
Later than 5 years
Total
14,420,697
7,809,652
239,259
67,125,057
1,396,701
–
13,903,635
–
–
95,449,389
9,206,353
239,259
22,469,608
68,521,758
13,903,635 104,895,001
Capital management
Capital includes equity attributable to the equity holders of the parent and debt.
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order
to support its business and maximise shareholder value. Objectives include, among others:
– ensure Group’s ability to meet both its long-term and short-term capital needs as a going concern; and
– to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
No changes were made in the objectives, policies or processes during the years ended 31 March 2012 and 2011.
The Group maintains a mixture of cash and cash equivalents, long-term debt and short-term committed facilities that are designed to ensure
the Group has sufficient available funds for business requirements.
The subsidiaries in the Group, when engaged in the business of captive power generation were subject to statutory requirement of maintaining
the captive consumers’ equity at 26% of the total equity. Apart from the aforementioned requirement, there are no other imposed capital
requirements on Group or entities, whether statutory or otherwise.
The capital for the reporting periods under review is summarised as follows:
Total equity
Less: cash and cash equivalents
Capital
Total equity
Add: borrowings (including buyer’s credit)
Overall financing
Capital to overall financing ratio
2012
2011
131,751,746 151,029,875
(71,104,280)
(37,876,393)
93,875,353
79,925,595
131,751,746 151,029,875
50,319,196
70,862,398
202,614,144 201,349,071
0.40
0.46
The Group’s goal in capital management is to maintain a capital-to-overall financing structure ratio as low as possible.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 76
25. Financial risk management objectives and policies continued
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the
capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying
assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares, or sell assets to reduce debt.
26. Summary of financial assets and liabilities by category and their fair values
Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are carried in the
financial statements:
Financial assets
Cash and cash equivalents1
Available-for-sale quoted instruments4
Restricted cash
Current trade and other receivables1
Non-current trade and other receivables2
Financial liabilities
Long-term ‘project finance’ loans3
Short-term loans1
LC bill discounting and buyers’ credit facility1
Current trade and other payables1
Non-current trade and other payables3
Carrying amount
Fair value
2012
2011
2012
2011
37,876,393
2,775,628
4,581,146
17,405,365
903,669
71,104,280
8,851,675
2,295,575
8,576,366
6,941,814
37,876,393
2,775,628
4,581,146
17,405,365
903,669
71,104,280
8,851,675
2,295,575
8,576,366
6,941,814
63,542,199
97,769,710
63,542,199
97,769,710
56,055,498
6,220,425
8,586,475
7,374,739
1,396,701
45,254,398
4,662,459
402,338
10,401,984
1,231,509
56,055,498
6,220,425
8,586,475
7,374,739
1,396,701
45,254,398
4,662,459
402,338
10,401,984
1,231,509
79,633,838
61,952,689
79,633,838
61,952,689
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate
the fair values.
1 Cash and short-term deposits, trade receivables, trade payables, and other borrowings like short-term loans, current liabilities approximate their carrying amounts largely due to the
short-term maturities of these instruments.
2 Long-term loans and receivables and trade receivables are evaluated by the Group based on parameters such as interest rates, individual creditworthiness of the customer and the
risk characteristics of the financed project. As of 31 March 2012, the carrying amounts of such receivables, net of allowances, approximate their fair values.
3 The fair value of loans from banks and other financial indebtedness, financial liabilities at fair value through profit or loss as well as other non-current financial liabilities is estimated by
discounting future cash flows using rates currently available for debt or similar terms and remaining maturities.
4 Fair value of available-for-sale instruments are derived from quoted market prices in active markets. For investments retained in OPGE and OPGRE, the fair value is based on the
report from independent valuers.
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 31 March 2012 (All amounts in £, unless otherwise stated) 77
26. Summary of financial assets and liabilities by category and their fair values continued
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into
Levels 1 to 3 based on the degree to which the fair value is observable.
– Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
Financial assets at FVTPL
Non-derivative financial assets held for trading
Available-for-sale financial assets
Unquoted securities
Quoted securities
Total
There were no transfers between Level 1 and 2 in the period.
Approved by the Board of Directors on 30 June 2012 and signed on behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
Level 1
Level 2
Level 3
Total
1,393,866
–
1,393,866
–
–
–
1,381,759
–
2,775,625
–
1,381,759
2,775,625
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements
78
Corporate Directory
Nominated Advisor and Broker
Cenkos Securities Plc
6-7-8 Tokenhouse Yard
London
EC2R 7AS
Financial PR
Tavistock Communications
131 Finsbury Pavement
London
EC2A 7AS
Administrators and Company Secretary
IOMA Fund and Investment Management Limited
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
Auditors
Grant Thornton
Third Floor
Exchange House
54-58 Athol Street
Douglas
Isle of Man
IM1 1JD
Legal Advisors
Dougherty Quinn
The Chambers
5 Mount Pleasant
Douglas
Isle of Man
IM1 2PU
Registrars
Capita Registrars (Isle of Man) Limited
3rd Floor
Exchange House
54-58 Athol Street
Douglas
Isle of Man
IM1 1JD
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 79
Definitions and Glossary
Act: Isle of Man Companies Act 2006
AGM: Annual General Meeting
Board: Board of Directors of OPG Power Ventures Plc
BHEL: Bharat Heavy Electricals Limited
BOP: Balance of Plant
bps: Basis points
CAGR: Compound Average Growth Rate
CEA: Central Electricity Authority
CIL: Coal India Limited
Company or OPG or parent: OPG Power Ventures Plc
EBITDA: Earnings before interest, tax, depreciation and amortisation
Electricity Act: Indian Electricity Act 2003 as amended
EPC: Engineering, Procurement and Construction
EPS: Earnings per share
FY: Financial Year commencing from 1 April to 31 March
GCP: Group Captive Plant
GDP: Gross Domestic Product
Government: Government of India
Great Britain Pound Sterling or £/pence: Pounds or sterling/pence, the lawful currency of the UK
Group Captive: Group Captive Power plant as defined under Electricity Act 2003, India
Group or OPG: the Company and its subsidiaries
GW: Giga Watt
IAS: International Accounting Standards
IFRS: International Financial Reporting Standards
Indian Companies Act: the Companies Act, 1956 and amendments thereto
LOI: Letter of Intent
KWh: Kilowatt hour
LSE: London Stock Exchange plc
MoU: Memorandum of Understanding
MW: Mega Watt
MWh: Mega Watt hour
O&M: Operating and Management
PLF: Plant Load Factor
PPA: Power Purchase Agreement
PSA: Power Supply agreement
ROE: Return on Equity
Rupees/INR or Rs: Indian Rupee, the lawful currency of India
SEB: State Electricity Board
SPV: Special Purpose Vehicle
State: State of India
The Code: the UK Corporate Governance code, issued by the Financial Reporting Council
UK/United Kingdom: United Kingdom of Great Britain and Northern Ireland
US$/USD or $: US Dollars, the lawful currency of the US
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements 80
Notes
OPG Power Ventures PlcAnnual Report and Accounts 2012OverviewBusiness ReviewCorporate GovernanceFinancial Statements OPG Power Ventures Plc is
developing and operating
power plants in India.
The Company is committed to
building shareholder value and to
being the first choice provider of
reliable, uninterrupted power at
competitive rates to its customers.
OPG is listed on the Alternative
Investment Market of the London
Stock Exchange (AIM:OPG).
Overview
01 Highlights
02 Our Operations and Projects
04 Market Overview
06 Business Model
08 Key Performance Indicators
10 Chairman’s Statement
Business Review
12 Chief Executive’s Statement
16 Maximising Opportunity
18 Continuous Supply
20 Strategic Locations
22 Operational Review
24 Principal Risks
26 Financial Review
30 Responsible Growth
34 Board of Directors
Corporate Governance
36 Corporate Governance
40 Directors’ Remuneration Report
44
46
Directors’ Report
Statement of Directors’ Responsibilities in Respect of the Accounts
Financial Statements
Independent Auditors’ Report to the Members of OPG Power Ventures Plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
47
48
49
50
52
53
78 Corporate Directory
79 Definitions and Glossary
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www.opgpower.com
India:
OPG Power Ventures Plc
No. 6, Sardar Patel Road
Guindy
Chennai – 600 032
India
T: +91 44 42911234, 228
Isle of Man:
OPG Power Ventures Plc
IOMA House, Hope Street
Douglas, Isle of Man
IM1 1AP
T: +44 (0) 1624 681200
Delivery and growth
OPG Power Ventures Plc
Annual Report and Accounts 2012